For December 2nd 2009

For December 2nd 2009

Questions and suggestions? Contact me at [email protected] Any information contained in this document are based on or derived from information generally available to the public from sources believed to be reliable. There’s no representation or warranty is made or implied that it is accurate or complete. Any opinions expressed are subject to change without notice. This post has been prepared solely for information purposes and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy. Charts were generated using Alpari UK’s MetaTrader 4.0

EURUSD

Euro fell to hit 1.4970 on Tuesday, slightly below the support at 1.4972. This was followed by a rise which ended at 1.5116 for now. The rise beyond 1.5083 rendered the downwards zigzag structure useless now. So, it has been removed from the chart. The upwards zigzag on the other hand has been adjusted in terms of the third point from 1.4972 to 1.4970. Some retracement points were also removed from the chart as 1.5083 had been broken. Supports are now seen at 1.5072 (the most recent intraday low), then 1.5058 (the congestion point after the pair rallied towards 1.5081 which is actually at the same level as the 38.2% retracement of the rise from 1.4970 to 1.5116). Subsequently, we have 1.5043, 1.5026, and 1.5005 as the next retracement levels. Finally, the big one is definitely the low at 1.4970 which could be said to had formed a double bottom pattern with 1.4972. Upside, there are three significant targets: the double projections at 1.5127/28, prior high at 1.5144, and let’s not forget the 76.4% retracement of the fall from 1.6038 to 1.2329 at 1.5159. The latter corresponds to another projection point at 1.5168. All three will serve as potential new swing high which could trigger a short-term reversal, probably retracing the upmove from 1.4970. Beyond 5168 we have another technical crossover at 1.5226/34 and at the far north lies 1.5384. Three things that could be done at the moment are first to take a LONG position with tight stop below 1.5058 and using the above resistance points as objectives, particularly 1.5127/28 and 1.5159/68. Second is to wait until the pair retraced at least towards 1.5043 or 1.5026 before establishing LONG positions, of which stop should be placed below 1.4970 but with the same target

at 1.5127/28 and 1.5159/68. Third, is to enter LONG now at a small fraction, and add at each retracement points at 1.5043, 1.5026, and 1.5005. Set all the stop below 1.4970 but with the same target at 1.5127/28 at least. Below 1.4970 the bullish scenario will be neutralized.

GBPUSD

Unlike EURUSD, cable held well above 1.6379 and rallied after falling towards 1.6390 to as high as 1.6646. As the resistance at 1.6591 had been broken, the downwards zigzag has been removed from the chart. The same goes with some retracement levels from 1.6270 to 1.6591. Cable’s rally stopped just above the 76.4% retracement level and whether this rally will continue or not is remain to be seen. Upside targets are found at 1.6646, 1.6700, 1.6745, and at the far end, 1.6898. Interim support is at 1.6601, followed by a set of fibo retracement levels of the upswing from 1.6379 to 1.6646 at 1.6583, 1.6544, 1.6512, and 1.6481. I am still bullish on cable, and shifting my critical support point from 1.6270 to 1.6379. Similar to EURUSD, LONG positions could be established immediately with tight stop possibly below 1.6601 or 1.6583; we can also wait until the pair retraced to 1.6544 or 1.6512 and enter LONG positions there with stop set below 1.6379; or scatter the entry points at each of the support levels with stop placed below 1.6379. Targets will be at 1.6646 first, then 1.6700 and 1.6745.

USDJPY

Unfortunately, the pair rallied above 87.00 towards 87.52, taking out the suggested stop level and slipping away at the moment towards mid-86 area. So far, it has retraced 38.2% of the entire rise from 84.80 to 87.52 and at the same time hit the 0.618x projection level at 86.52. The big question is whether the zigzag from 84.80 to 87.52 constituted an entire correction or was it merely the first leg of the correction (wave A). After all, 87.52 lies just next to a technical crossover at 87.44/45. If the current structure developing is the wave B, then we may expect the pair to aim at 86.15/18 or 85.65/85 area before it completes the last corrective wave towards 88.01/05 or even 88.95. We cannot be sure regarding the wave structure, but with such a steep fall, USDJPY may retrace more than 87.52. I prefer that we are now at wave B, with focus at the downside supports at either 86.15/18 or 85.65/85. Critical resistance could be none other than 87.52, but interim resistances are seen at 87.08 and 86.76. Near term support lies at 86.48/52. For today, look to short with stop set above 86.76, aiming for supports at 86.15/18 and 85.65/85. A more longer-term play may set 87.52 as the stop point instead of picking smaller stops. Once the targets have been reached, we may consider taking LONG positions while above 84.80, expecting for wave C to commence.