Forex News – 5th July 2011

EUR
The market is concerned about a Chinese rate hike this coming Friday due to the high inflation
and Moody’s warning the ,Chinese bank system has prompted risk aversion.

EUR/USD has weakened by +70 pips at the time of this writing. A rumored option barrier at
$1.4600 may attract some attention ahead of the ECB expected hike this Thursday.
Technical Observation, EUR/USD

EUR/JPY trading idea

EUR/JPY cautious temporary sell below 117,64

Whilst the weeks overall bias is forecast to remain bullish, after 6 days of gains positive investor
sentiment is overstretched. In addition prices have tested towards 118.00, an area that has
repeatedly failed to sustain Investor’s enthusiasm for more than 1 months trading. This loss
of bullish momentum at overstretched extremes is being highlighted with yesterdays virtually
unchanged close and the weakness today in Asia. However dips are still being bought which leaves
this mornings bias just cautiously bearish below 117.64 for a correction to some of the past
5 days gains. Targets are for losses to 117.03, Mondays low then either 116.75, Fridays bottom
or at most 116.50 risk to this forecast would be buying through todays 117,64 top. This should
be a bullish signal that sentiment is improving again to retest 118.00 then 118.30, this weeks first
key target and a 50% recovery to the losses since April ( 123.35 – 113.41)

Commentary

Support is provided at $1.4443.

The pair has dropped due to the risk aversion that is taking place as Moody’s warned Chinese
bank system outlook Is turning negative.

$1.4443 is expected to provide decent support, pullback may extend as far as $1.4560, though
attraction at $1.4600 Level may cause the pair to rise even further.

If support at $1.4443 gives way, a deeper retracement to the previous gains is seen, targeting
$1.4326 initially, then $1.4115 is seen as a 100% correction to all the gains that occurred
since 24th June.

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