E$ exceeded my expectation last Friday by printing a high of 1.2991 even though I have made provision for that move. As I have mentioned in "8 = Prosperity", dated 23 Nov 12, a convincing close above 1.2900 now would be a bullish signal for this currency pair despite the fact that it is still staying below the trend line (see chart). On the daily chart, it is already staying above the 21, 50, 100 and 200DMAs. On the weekly chart, it is staying above the 21 and 50WMAs but still below the 100 and 200WMA at 1.3405 and 1.3510 respectively. Daily momentum remains strong but we are nearing o/b condition and this has increased the probability of a near term consolidation. On the upside, the easy money phase is probably over for now. The next phase of this climb will be faced with more intraday volatility. Today, we have EU leaders meeting once again and any lack of commitment should send the E$, which at current levels is more vulnerable, lower.
Order book this morning revealed the following:
Stop loss: 1.2730/40
Limit: 1.2850/70 and 1.3000
Technically, intraday indicator is in o/b levels and any rally here may not be sustainable. Intraday momentum is starting to show signs of turning from up to consolidation. I would expect price to soften back to retest 1.2900 but am wary of a possibility of deeper correction to 1.2840/60. Having said that, I would still prefer to buy on the dip.
For today, 1.2900 (1.2840/60 news induced) to 1.2980/90 (1.3030/40 expanded)
In the weeks ahead, as long as 1.2900 pivot holds, we are probably in for a progressive appreciation of E$ to challenge previous high of 1.3172 with the next target at 1.3400.
|E$ Weekly chart - Close to trend line with strong momentum|
The easy money rally phase is over and the next phase will take us off road with more intraday volatility but still headed for the objective of Y85. For this week, the expected range is from Y81.70/80 to Y83.40/60.
|USDJPY Monthly chart - Staying afloat|