Week of August 8, 2008-European Session

Our forecast from Wednesday proved to be very accurate as EURUSD confirmed a sell at 10:00 GMT, while the other mentioned pairs all confirmed on the close of the 12:00 GMT prices, as our price targets were also achieved. As for today’s forecast, our outlook was for EURUSD to next target the 200 day EMA currently at 1.5192, but that objective has been essentially achieved earlier in Asia sesssion today. So, now we will step back a bit and look at what has occurred over the last few days in our efforts to forecast where the EURUSD goes next. As you recall, on July 30, we previously indicated that a daily close below 1.5583, which is the 61.8% of the 1.5302-1.6037 rise, would see prices continue to move lower with 1.5302 as the initially target. The EURUSD closed at 1.5380 on July 30 and what followed was a continuation lower with prices reaching 1.5302 ealier today. So, the short term rise from the June 13 low at 1.5302 is now complete at 1.6037. This brings us to the next significant rise in the EURUSD, and that being the rise from the December 12, 2007 low at 1.4309, as we have previously stated that only a daily open and close below 1.5377 would complete this rise at 1.6037. Today, the EURUSD opened at 1.5313 and should close well below the 1.5377 level today, thus the medium term rise from the December 12, 2007 low at 1.4309 will be complete at 1.6037, as the next level of support will be the 50% of 1.4309-1.6037 at 1.5173. Any sustained close below this level will target the 61.8% level which is at 1.4969. So, we now have the short term rise from 1.5302 and the medium term rise from 1.4309 both now complete at 1.6037. This brings us to the broad outlook, the rise from the November 2005 low at 1.1642, as we have mentioned in prior updates, only a weekly open and close below 1.4358 will confirm the rise from 1.1642 is complete at 1.6037. Hoever, one hint that prices may be on their way to 1.4358 will be a daily close below 1.4679, as this will favor prices continuing to move lower with 1.4358 as the eventual target. Though, as to the broad outlook, only a weekly open and close below 1.4358 will complete the rise from the November 2005 low of 1.1642 at 1.6037. Also, a daily open and close below 1.5173 will suggest the EURUSD is entering into a medium term consolidation pattern within the 1.4679-1.5173 zone. A sustained break of the this zone will favor an extension in the direction of the break with downside break of 1.4679 targeting 1.4358, while an upside break of 1.5377 will target 1.5605. Finally, as mentioned in the August 5 update, the 100 day EMA currently at 1.5527 has been tested 3 times in 2008 and not until Tuesday’s close have prices been able to sustain below this level. Often, the break of such significant levels will see the market subsequently move back to test these levels and sort of “kiss em good bye” before continuation of the prevailng trend, so, look for a retest of the 200 or 100 EMA in the days ahead, as this should merely be a corrective move before a much broader move down. We will continue to monitor this possibility in the days ahead.