Stronger U.S. economic data and another round of solid demand for Treasuries has helped to ease safe haven flows, driving the U.S. dollar lower against every major currency except for the Japanese Yen. Durable goods rose to the highest level since December 2007 while jobless claims continued to retreat. New home sales were disappointing but it is still encouraging to see the number of new homes sold increase.

Looking ahead, the major currency pairs are once again nearing critical levels, leading many people to wonder if there will finally be enough negative dollar momentum to finally push the EUR/USD  above 1.40 and the GBP/USD  above 1.60 on a closing basis. In our opinion, it says a lot about risk appetite to see investors completely shrug off the GM bankruptcy. Two weeks ago, we argued for short and long term weakness in the dollar and even though the dollar has depreciated significantly since then, our arguments still hold.

There is scope for further dollar weakness but traders have to be careful because the velocity of the move will not be as sharp as what we have seen over the past month with many traders are already short dollars. Utilizing the same titles as our May 14th report, here are the reasons why there could be more short and long term dollar weakness.

Source: Fx360.com

GBP/USD

Sterling basically traded sideways yesterday, bouncing off 1.5852and reaching 1.6015.

1.5984 to 1.6040 offers good technical resistance. So would at this point still sell into strength to these higher levels, but this time put stops above 1.6108 if possible… If not get out if 1.6060 breaks but look to get back in if the market disappears back below 1.6040.

1.5870/55 is again your first target. Here sellers are looking to cover shorts. They will re-instate if below 1.5850 as a break of this support keeps the immediate bias to the downside and sees 1.5780 to 1.5725 then as your targeted area.

Read more… EUR/USD Focus

Source: FXstreet and Charmer Charts.com

Today we git a tricky session as we got fast moves on the both sides at the European opening, but anyway there was a fast scalp opportunity at Cable. Let’s see the review:

- 60m. Asian Channel support becomes Resistance as it holds for the first hours.
- Price touches the resistance and reverses.
- Price breaks ascending TrendLine
- Short entry opportunity. Stop above previous swing high.
- Partial profit taking at Asian support. We leave the rest running. (”The runner”)
- Caution !! Price reverses very strongly at “50″ round number and 21% fib. ret. 60m. from the previous up leg. The reaction was a “V” shape pattern and it’s one of the most difficult ones for trading, as you usually realize after the fact.

Cable 60m

Cable 1m

In the current market environment, for forex traders, being in the recovery trade means to be short U.S. dollars. In the last week of June 2008, the bear market was declared and in July, oil prices peaked at $147 a barrel. This triggered massive deleveraging across the financial markets driving currency traders into the safety of U.S. dollars and Japanese Yen. Since then however, the dollar and Yen have recovered dramatically.

One way to gage how far the recovery trade has come is to measure it against the deleveraging losses of 2008. We simply compare the dollar’s performance from January 2008 to present, peak to trough.

Based upon the following table and chart, the AUD/USD, USD/CAD USD/CHF and EUR/USD have retraced the most while USD/JPY and the GBP/USD have retraced the least.

Source: Fx360.com

source: CNBC

Today we got an amazing opening at the Frankfurt opening in Cable. The setup was very easy and It’s been a pattern that shows up very often in Cable (This month several times, even yesterday again…). Let’s review the setup:

- 60 min. Topping formation (4th top).
- Just at Frankfurt opening, price touches the 60m  resistance level  1.5950
- Price reverses and goes straight forward for 100 pips, bouncing at yesterday’s low
- Price breaks ascending trendline.

Cable 60m

Cable 1m

Today we get a topping formation in cable at the European opening, the price is making new highs every day so we are expecting some corrections. This is the review:

- Topping formation in 60m.
-Price approaches yesterday’s high after the Frankfurt open, but fails.
- 123 formation and ascending trendline broken on 1m. chart (First short entry opportunity). Stop above previous swing high
- Price breaks Asian support (Second entry opportunity). Price rebounds.
- Partial profit taking just in case is a false signal. Let the rest running..
- Profit target for the rest:  1, 5750 is round number and 38% retr previous leg  in 60m
- If you don’t close position there you can see a exhaustion figure at that level, 123 pattern, so the price is telling you it may turn around.

The dollar fell for a third day versus most major currencies on improving risk sentiment and optimism the worst of the financial crisis has passed. Bank of America said it raised $13.47 billion by selling equity and Treasury Secretary Timothy Geithner told lawmakers the financial system is beginning to heal. US stocks reversed earlier gains after the Federal Reserve predicted a deeper recession this year and slower recovery in 2010. The S&P 500 declined 4.66 points to 903.47. The dollar index fell to 81.15, the lowest level in five months. There is important support in the 80 area. If this is broken, a drop to 76 is likely. However, the dollar is getting oversold; thus, we are raising the stops on our short dollar positions to lock in profits. The yen rose as Japan’s GDP declined a less-than-expected 4.0% q/q in Q1. Sterling surged through resistance on the improving banking outlook and comments by Chancellor Alistair Darling that the UK recession will be over by the end of the year. Weaker-than-expected Australian consumer sentiment limited gains for the Australian dollar.

Read more…

source: CMS Forex and FxStret.com

Currency traders refuse to stop selling U.S. dollars. The more pessimistic outlook from the Federal Reserve should have driven traders back into the safety of U.S. dollars, but instead they drove the U.S. dollar even lower. In fact, the greenback fell to the weakest levels this year against the British pound, Canadian and Australian dollars. Even though the U.S. dollar is still a ways from its year to date lows against the euro (at 1.4070) and the Japanese Yen (at 87.13), it is closing in on significant levels against the New Zealand dollar. The breakdown in the dollar has been very significant and further weakness is possible, but the bleeding could slow as the major currency pairs head towards critical levels. The 1.40 level will be significant resistance for the EUR/USD,  while 1.60 is the level to watch in the GBP/USD.

Source: FX360.com

This is a quick review about EUR/USD and GBP/USD:

EUR/USD

Target achieved yesterday of 1.3668, and as expected the market is currently correcting.

You have good support at 1.3520/10 and 1.3480 and buyers will look to defend this support. Only below 1.3400 would they wobble and reverse , joining sellers in their quest for 1.3340.

1.3668 is your resistance. If sellers fail in their task, look for buyers to break through this level and reach 1.3722/40. Above 1.3840 sees 1.3856/96.

Read more… GBP/USD Focus

Source: FXstreet and Charmer Charts.com