Weekly outlook - Foreign Exchange

3 May

FOREIGN EXCHANGE - Forex

AUD/USD

Cautiously bearish unless above .9340.

Investors sold the Aussie to lower levels last week for the second week in succession. While the lows were not held – buying interest occurred near .9100 – gains above .9300 attracted selling interest. The net result of this contradictory price action was a minor decline. But while this highlights a degree of investor indecision, momentum is negative and with this in the background the outlook is cautiously bearish unless there is a move above .9340.

A move below .9205, which is half of Wednesday’s net rise, confirms the bearish outlook giving a next downside target at .9134 which is last week's low, followed by .9053, the open from five weeks ago. A move above .9340, the two-week high, would change the outlook to bullish with a first target at .9391, this year’s high, followed by .9467.

RES: .9340 .9391 .9467

SUP: .9205 .9134 .9053

EUR/USD

Cautiously bearish unless above 1.3416.

For the second week in succession the most bearish levels traded for 12 months were rejected. However, despite the last three trading days all posting positive performances, the rally was a weak one with barely half of last Tuesday’s decline reversed. With this price action indicating the temporary nature of profit-taking the outlook is bearish unless there is a move above 1.3416. The immediate downside objective is 1.3184, which is Thursdays low. Below that point then gives a target at 1.3114 which is last week's low, then towards 1.2887, which is the low from April 2009.

A move above 1.3416, last week's high, is a clear bullish signal. Prices could then move to 1.3524 which is the two-week high, or even towards 1.3693 which is April’s high.

RES: 1.3416 1.3524 1.3693

SUP: 1.3184 1.3114 1.2887

GBP/USD

Cautiously bearish unless above 1.5499.

Investor selling of sterling resumed last week. Although the week's lows were sharply rejected, the rally failed on Friday and this upward rejection should return the focus to the downside. It is likely that there will be considerable volatility this week and so the outlook is bearish unless there is a move above 1.5499. The immediate downside target is 1.5120 which is last week's low, with a move through that point then focusing on 1.5062, which is half the net gains from five weeks ago, then towards 1.4892, the five-week base.

A move above last week's high of 1.5499 would change the outlook to bullish. Once above that level, sterling could then travel to 1.5578, the 10-week peak, followed by 1.5622, a recovery of half of this year’s decline.

RES: 1.5499 1.5578 1.5622

SUP: 1.5120 1.5062 1.4892

USD/JPY

Bearish unless above 94.61

Signals were bullish last week and although prices ended with a small improvement buying interest stalled above 94.00 every day. The failure has been highlighted by a loss of positive momentum and a bearish hammer at Fridays high, a pattern of trading consistent with exhausted bullish sentiment. This gives a bearish outlook while the yen is below 94.61. Downside target are at 93.39 to 92.82, last weeks low, then 91.60, the low trade for April.

The outlook would change to bullish if there is a move above the 94.61 high. The yen could then make further gains to 95.00 or even 96.00

RES: 94.61 95.00 96.00

SUP: 93.39 92.82 91.60

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