Week of March 2, 2009

EURUSD closed February at 1.2665, the lowest monthly close since April 2006, as the long term outlook remains firmly to the downside while prices remain below 1.3355.  A weekly open and close below 1.2583 confirms further downside extenison with the October 28, 2008 low of 1.2328 as the next objective followed by the November 2005 low of 1.1642. The short term or intraday outlook also has room for further downside extension  with a daily close below 1.2612 firming up the outlook for lower prices in the days ahead. As to the upside,  trendline resistance from the February 23, 2009 high of 1.2990 comes in today around 1.2730, with a 1 hour open and close above this level confirming further intraday extension to the upside targeting 1.2810 followed by 1.2871. Above 1.3 will see an increase in upside momentum and volume with risk for 1.3355. However, until a weekly open and close above 1.3355, the broad trend remains down.

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 during that year 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 forecast on August 26, 2008 for GBPUSD to target 1.3682. (Please read)  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 1.4647 while trendline resistance from the December 2008 high comes in at 1.4697.  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. Again, the trend remains firmly to the downside.

AUDUSD’s broad trend favors further downside risk as only a monthly open and close above 0.7474 will complete the fall from 0.9850 while the October 2008 low of 0.6006 holds. Once above 0.7474, prices will then move within a 0.7474-0.8232 consolidation zone before another attempt to the downside. Weekly studies continue to favor further downside risk while daily studies finds trendline support from the October 27, 2008 low at 0.6006 coming in at 0.6335 as of this writing to hold.  Intraday studies also continue to point down as last Friday’s fall from 0.6552 reached trendline support at 0.6338 before a correction unfolded. Look for intraday prices to trade within a 0.6392-0.6470 consolidation zone with a sustained break of this zone witnessing further price extension in the direction of the break.