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CURRENCY ANALYSIS

Major Currencies

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03 May 2017

EUR/USD Chart

Despite strong gains by both the Euro and Pound last month neither currency has managed to engineer a structural change in Dollar terms as yet. EUR/USD prices have not even managed to surpass the psychological 1.1000 level (and in any case more important 1.1300 resistance remains some way off) while GBP/USD has simultaneously failed to hurdle 1.3000 with crucial resistance at 1.3500 even further away. It is not inconceivable that one or both pairs does indeed break higher in coming weeks and such a development would, if seen, confirm completion of broad negative trends from 1.3993 and 1.7192 respectively. However it is also still possible that both break lower again going forward instead. While EUR/USD values evidently posted an intermediate bottom at 1.0340/50 earlier this year no impulsive advance has subsequently been seen with values instead only “stair-casing” higher in recent weeks. Meanwhile the response from 1.1855 (October 2016 GBP/USD extreme) continues to look corrective - implying risk for one more cycle low eventually. At least some respite to previous broad-based Euro and Sterling selling is currently being provided via improving JPY crosses. Thus if these influential (EUR/JPY and GBP/JPY) pairs extend their recent recovery sequences for another week or so then underlying improvements thereby signalled could well spill over into EUR/USD and GBP/USD -much as was the case during previous major reversals. At the moment though no such turnarounds have yet been confirmed with prior ranges continuing to operate. In all cases sufficient compression already exists to enable sizeable relocations over coming weeks but as discussed previously this situation has persisted for some time already. Of the two currencies Sterling looks more obviously to be still in the middle of a bear trend against the Dollar since it started declining after similar moves had already been seen elsewhere. The eventual bottom need not be significantly beneath 1.1800 in GBP/USD terms but this obviously still leaves room for declines in coming weeks/months. Equally EUR/USD would probably find little support under 1.0350 until 0.9750 and thus again remains vulnerable on the downside from a short to medium term perspective unless an important floor (i.e. breach of 1.1300) is seen first/next.

 

EUR/GBP

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Sterling values need to accelerate under at least 1.2200 (and certainly beneath secondary/key 1.2000 secondary demand) to confirm resumption of broader negative trends here. If seen an extension back toward 1.1500 would be inferred next with potential for fresh cyclical lows thereafter. However as with EUR/USD below an intermediate range still exists at present and while 1.2195/05 support holds below prices can potentially stage another recovery first/next instead. Resistance looks considerable around 1.2650 but is thin until 1.2450.

 

Primary Support

Primary Resistance

Short Term Trend

Medium Term Trend

0.8295/00

0.8580/85

Side/Higher

Side

 

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