Breakouts Need Confirmation

Euro: The euro (FXE) rose about 1.7% against the dollar last week. That is its best weekly performance in two months. Stops were triggered on the break of the $1.1000 area and then above $1.1100. However, as it approached the late March high (~$1.1165), the risk-reward considerations shift, and the euro fell to new session lows just before the weekend near $1.1070. It still managed to settle above its upper Bollinger Band (~$1.1080). The 200-day moving average seems to check rallies in April and in May until the very end. It begins June a little above $1.1010. A break below there, which also is roughly the halfway point of the recent bounce, would leave the single currency back within its former range. On the upside, a break of $1.1165 signals a quick test on the $1.1200 area, and the next significant hurdle may be near $1.1265.  

Japanese Yen: The dollar broke down to almost JPY107, a nine-day low,ahead of the weekend before reversing higher as month-end adjustments appeared to have been made around the NY fix. It jumped practically back to the week's highs just shy of JPY108 before moving sideways again.The 200-day moving average, the upper Bollinger Band, and a (38.2%) retracement of the decline from late March to early May are all found in the JPY108.20-JPY108.35 area. (FXY)

British Pound: Sterling (FXB) had its best week in May with about a 1.25% gain.It sounds more impressive than it is. Only two major currencies did worse, the yen and Swiss franc (FXF).Sterling was easily the worst-performing major currency in May, falling more than 2%. The next heaviest was the yen, which lost about 0.6%. Sterling overcame resistance near $1.2360 ahead of the weekend, which also marks the midpoint of May's range ahead of the weekend, but could not sustain the momentum and quickly was able to be pushed back toward $1.2300. Key support is seen in the $1.2215-$1.2230 area in early June.  

Canadian Dollar: The US dollar fell to a marginal new low ahead of the weekend, near CAD1.3715, its lowest level since March 12. It reversed higher and closed well above the previous session high (CAD1.3790), creating a potential key reversal.The momentum indicators have not turned, but they are stretched or nearly so. A move above CAD1.3840 would be constructive, while additional resistance may be seen around CAD1.3880. The price action here seems to make it a better candidate than the Australian dollar to fade what appears to have been a breakout. (FXC)

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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