Going Forward, These FX Levels Will Be Key

• April 5, 2004
• Dave Floyd

Bo
Harvey is writing in place of Dave today.

 

This
week it will be interesting to see where the currencies go from here
after the positive jobs number that was reported on Friday, and if the USD can
get some legs underneath it I suspect the euro will suffer the most, although
the GBP/USD is still setting up as a decent short upon a break of the 1.7825
level, as I mentioned last week. While I don’t recommend blindly jumping the
gun, if you would like to get a “head start” on a GBP short, the 1.7920 level is
also a key level that if broken, could very well put 1.7825 in sight as the next
significant target. Just keep a close eye on any dollar longs out there, since
the long-term trend lower hasn’t been decisively changed.

 

Regarding the USD/JPY, now that
it has broken the key 105.00 level, 101.25 becomes a long-term target, which is
the lower from December of 1999.  Given the way the BOJ and MoF operate, I
suspect that they won’t let the 101 support level give away without supporting
the market for a considerable time first, as expectations adjust.

 

To follow up on the long term
EUR/JPY short that is still setting up, the failure at the 138 level on the
monthly charts set up a double top and also happened to occur at the 200 month
moving average and the underside of the up trendline off the October 2000 low. 
There is also a monthly stochastic divergence that has set up in conjunction
with the double top at 138.  The 124.14 level is the neckline of the double top
that is a reasonable trigger to enter a long-term short.

 

Lastly, on a more short-term
basis, the 1.1980-1.2040 level in the EUR/USD is going to be key going forward
and well worth watching closely for potential euro shorts. 

 

Have a great trading week,

Bo Harvey

bo@aspentrading.com