April 17, 2011
The Week Ahead April 17 2011

The EURGBP looks like further declines. Even though it managed to end the week above 0.8940/50 previous resistance, it 1) respected the 50% Fibonacci level on the bounce after the breakdown from 0.8950 highs and 2) made lower highs on each bounce out of the 0.8810s lows.

EURGBP 60 minute chart

A break below 0.8800 targets 0.8750. A hold above 0.8800 targets 0.8900.

EURGBP daily chart

The GBPUSD also looks like it has put in a top at 1.6430, which is the 38.2% Fibonacci level on the monthly chart. Even as price continues to hold above 1.6250, it is the failure at 1.6400/30 that gives the pair an increasingly bearish outlook.

GBPUSD 60 minute chart

GBPUSD daily chart

Bears must hold below 1.6250 to build the momentum needed for price to target the 1.6182 50% Fibonacci retracement level. As long as price continues to remain below 1.6325 at the market open, price is likely to decline towards the 1.6250 support. A hold above 1.6250, however, will have price targeting 1.6400/30 highs again. A break above the highs targets 1.6500. However, only a daily close above 1.6430 will keep cable bullish.

The GBPAUD is a little more uncertain. After its breakdown below 1.5750, the pair became rangebound between 1.5440 and 1.5650. However, during Friday’s trading session the GBPAUD finally broke below the range bottom to a low of 1.5415. However, the pair closed the week back at 1.5440 signaling to me that this was merely a range extension to the downside rather than a breakdown. In addition, as GBPAUD broke to new lows, the AUDUSD failed to break above its highs at 1.0580.

GBPAUD daily chart

GBPAUD 60 minute chart

In my opinion, this pair remains rangebound. Watch these various Fibonacci retracement levels to see if the downside momentum remains. However, I anticipate GBPAUD will rally back to the top of the range at 1.5650 as long as AUDUSD remains below 1.0580. A break above 1.5670 high targets 1.5750. If price remains below 1.5440, expect price to target 1.5300 support.

Fundamentals

  • China PBOC Raises Deposit Reserve Requirement Again (MarketWatch)
  • Gold Over £900/oz As British Pound Falls Sharply - Soaring Inflation Sees UK Retail Sales Plunge Most On Record (Zero Hedge)
  • UK Inflation Plunges As Retail Sales Drop By Most On Record (Zero Hedge)
  • The Euro Is Sliding After Europe’s Worst Nightmare Comes True In Finland (Business Insider)
  • Greece Says No Restructuring Plan in Place as Traders Raise Default Bets (Bloomberg)
  • G-20 Names ‘Too Big to Ignore’ Economies, Downplays Shocks (Bloomberg)

Trade what you see!

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