Week of December 10, 2008

EURUSD remains in a medium term consolidation phase with trendline resistance from the October 30, 2008 high of 1.3298 coming in at 1.2955 today, while to the downside trendline support from the October 28, 2008 low of 1.2328 comes in today at 1.2500.  A daily close above or below these trendlines will see further extension in the direction of the break.  As to the broad outlook, the fall from the September 22, 2008 high of 1.4866 remains active as ONLY a daily open and close above 1.3298 will complete this fall while 1.2328 holds, as prices will then move within a 1.3298-1.3896 consolidation zone before attempting another move to the downside. Intraday, look for minor support at 1.2900 with a 2 hour open and close below 1.2900 suggesting further downside risk.

GBPUSD also remains in a nearterm consolidation phase since the December 4, 2008 low at 1.4467, with a sustained break of 1.4467 targeting 1.3682.  To the upside, trendline resistance from the September 25, 2008 high of 1.8666 comes in today at 1.5036, as a daily open and close above 1.5036 will see further upside extension towards 1.5517, as ONLY a daily open and close above 1.5517 completing the fall from 1.8666 at 1.4467, with prices then moving into a 1.5517-1.6567 consolidation zone before attempting another move to the downside. Intraday, look for a 2 hour open and close below 1.4793 to confirm further downside risk towards 1.4717 with a daily close below 1.4550 favoring further down side extension.

We will have further updates on Friday or earlier should closing prices break the meduim term consolidation phase. RW