EUR/GBP has recently bounced decisively up off an important uptrend support line, thereby continuing the upward momentum that has been place for several months now. Could this pair be re-targeting the recently established record highs? For the technicals on this key cross, please click here for Wednesday’s Chart of the Day.

EUR/USD price action has descended to approach support in the 1.2800 region, but has stalled above this support as of Tuesday morning. This level was noted both on Monday’s Chart of the Day and right here on this blog. Any strong subsequent breakdown below this 1.2800 support could target further key support in the 1.2550 region, potentially on its way towards extreme support around the 1.2330 long-term lows.

Like the euro and pound, the Swiss franc has been battered mercilessly by the U.S. dollar on Monday and Tuesday. For the technicals on the key USD/CHF currency pair, please click here for Tuesday’s Chart of the Day.

Price action on GBP/USD as of Tuesday morning has hit a new 7+ year low after breaking down below the bottom border support of a prolonged wedge consolidation. Where this pair was previously giving signs of forming a tentative base, the dollar bulls have been relentless and overpowering against the European currencies this week thus far. At this juncture, the pair has reached and is stalled around very long-term support in the 1.3900 region. Any continued bearish momentum that breaks down and closes significantly below this level could target further support around the 1.3680 level, the low extreme reached over 7 years ago.

I will be holding an FX Street premium webinar on Monday, January 26, 2009 at 13:30 GMT (8:30 AM U.S. Eastern Time). The title is “Disciplined Position Trading”. Learn the ways in which many professional traders shun the immediate gratification of short-term trading and concentrate on the really big, long-term moves in the forex market. This webinar will focus on the best methods for exploiting the highly trending nature of currencies, and will cover strategy, psychology, and risk management. If you are an FX Street Premium Subscriber, check out this webinar, as it will be a very useful and informative session. For more details and to pre-register, please click on the following link: http://www.fxstreet.com/live/sessions/session.aspx?id=06666091-d259-4c1d-aaee-7079c238c848 . Thank you!

James Chen

After offering a glimmer of bullish hope late last week, EUR/USD (a daily chart of which is shown) has once again fallen to the bears as of Monday morning in New York. This indicates that the small upswing on Friday was probably just a minor retracement in the continuing downtrend. As it has since late December, the pair is continuing to look bearish, potentially targeting the long-term lows around 1.2330. Before possibly reaching that depth, however, if price drops substantially below the 1.3025 level, intermediate support resides around the 1.2800 region.

Below are major forex price levels to watch for the upcoming week of Jan 19-23, 2009:

EUR/USD - 1.3025 / 1.3798
USD/JPY - 88.46 / 94.62
GBP/USD - 1.4348 / 1.5372
USD/CHF - 1.0863 / 1.1287

After descending back down to a significant downtrend line from which it broke in the very beginning of the year, USD/JPY (a daily chart of which is shown) has just made a pronounced pullback bounce off the trendline in a classic case of resistance becoming support. Oscillators like the displayed Stochastics are showing a turn-up of momentum from extremely oversold. As of early Friday morning in New York, price is just under the key 91.00 support/resistance level. If price subsequently makes a strong break above this level, major resistance to the upside resides around the 93.50 region.

Unlike the strong recent directional movement on the other major pairs, GBP/USD (a daily chart of which is shown) has been displaying a prolonged consolidation. This consolidation has now taken the rough form of a descending wedge pattern, and has been validated by at least three touches on each side of the wedge. The pair appears now to be forming a base, but any break below the bottom wedge border will obviously invalidate this view. In any event, there should shortly be an upside correction within the context of this converging consolidation, in which case the top of the wedge would serve as an obvious resistance target. And any strong break above the top wedge border should lend significant strength to a potential bullish reversal outlook.

In a market environment of increasing risk aversion, yen has been making substantial gains. To view the technicals on the key USD/JPY pair, please click here for Wednesday’s Chart of the Day.