EURUSD Daily Chart
In last week’s Scalp Report, we highlighted the EURUSD which was approaching key resistance at the 1.31-threshold. Indeed this level held with the pair triggering all of our support targets before reversing just below Break Target 4 at 1.2896 (low 1.2875). In Monday’s Analyst Pick we noted the long bias initiated at the Sunday gap open with topside targets eyeing, “key resistance at 1.2950 with a break above this level alleviating further near-term weakness into 1.3015.” The 23.6% retracement taken from the November advance rests here and the pair now looks poised for a test of this key level ahead of tomorrow’s highly anticipated FOMC rate decision where Bernanke is expected to announce a new form of easing as operation twist comes to an end in 2012. Note that we leave room for a run-up into last month’s high and the 61.8% retracement from the November high at 1.3030 before invalidating our near-term bearish bias with such a scenario targeting levels just shy of the 1.31-handle. Longer-term prospects remain bearish below this level.
Interim daily support rests with the 38.2% retracement at 1.2950 with a break below this mark exposing key support at 1.2880, a level which has served as a clear pivot for the past few months. Break targets extend down to the 61.8% extension at 1.2840 and the 200-day moving average at 1.2783.
EURUSD Scalp Chart
The 30min scalp chart shows the euro rebounding off the 50% retracement at 1.2892 with the Sunday gap open offering an obvious long bias early in the week. Interim resistance now stands at the 1.3015 with a breach above our topside limit at 1.3030 eyeing resistance targets at the 38.2% Fibonacci extension taken from the November and December lows at 1.3053 and the 50% extension at 1.3108. The region between 1.3108 and the monthly high at 1.3125 represents a high-risk scenario as it is likely to serve as a pivot in price action.
Minor RSI divergence warns of a possible near-term correction with a break below support at 1.2985 exposing support targets at the 38.2% retracement at 1.2950, 1.2920 and the 50% retracement at 1.2895. A break below last week’s low at 1.2875 opens the door to our primary objective at the 61.8% retracement at 1.2840. A quarter of the daily ATR yields profit targets of 20-22 pips per scalp depending on entry. Should ATRto pullback dramatically, adjust profit targets as need to ensure more feasible scalps.
With the FOMC on tap tomorrow, traders are encouraged to limit exposure as we head into the print with the subsequent press conference likely to fuel added volatility in USD based pairs.
*We will remain flexible with our bias with a break below1.30 eyeing subsequent support targets. It’s extremely important in these market conditions to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.
Key Threshold Grid: EURUSD
Entry/Exit Targets
Timeframe
Level
Significance
Resistance Target 1
30min
1.3015
23.6% Retracement
Topside Limit
30min
1.3030
61.8% / Nov High
Break Target 1
30min
1.3075
Soft Resistance
Break Target 2
30min
1.3105
50% Fib Extension
Break Target 3
30min
1.3125
Monthly High
Break Target 4
30min
1.3160
61.8% Fib Extension
Support Target 1
30min
1.2985
23.6% Fib Extension
Support Target 2
30min
1.2950
38.2% Retracement
Support Target 3
30min
1.2920
Soft Support
Support Target 4
30min
1.2892
50% Retracement
Bottom Limit
30min
1.2875
Monthly Low
Break Target 1
30min
1.2840
61.8% Retracement
Break Target 2
30min
1.2800
Psychological Barrier
Break Target 3
30min
1.2760
78.6% Retracement
Average True Range
Daily
82
Profit Targets 20-22pips
*Ranges between the highlighted cells are not to be played- these are key support/resistance regions which can often serve as a pivot and caution be used around these targets
Other Prospects:
USDOLLAR Daily Chart
The Dow Jones FXCM Dollar Index (Ticker:USDOLLAR) has now come into support at the 38.2% retracement taken from the September advance at 9945. This level continued to serve as a pivot in price action and tomorrow’s rate decision could tip the scales. A break below 9945 exposes key support in the region between the 50% retracement and the S1 monthly pivot at 9906-9914. Interim topside resistance now stands at 9963 backed by the confluence of the 23.6% retracement and the monthly pivot at 9993 with a move above the 200-day moving average at 10,003 alleviating further downside pressure. Note that RSI has continued to hold above the 40-threshold suggesting that the pullback off the November highs may simply be a near-term correction in a broader bull market.
USDCAD Daily Chart
The USDCAD has now approached what I believe to be a possible inflection point with the pair holding just above the support region between the 50% retracement taken from the August advance and the S1 monthly pivot at 9844-9858. The Fed may serve as a catalyst here with longs taken from this range targeting Fibonacci resistance at 9940-9955 (confluence with monthly pivot). A break below 9844 exposes the key support at the 61.8% retracement and the S2 monthly pivot at 9775-9795.
USDJPY Daily Chart
The New Zealand dollar has posted an impressive rally off the November lows with the NZDUSD encountering key resistance today in the region between key Fibonacci extensions at 8385-8400. This move now completes a 100% extension off the initial advance off the November lows with a breach above this mark accompanied by a breach of the 70-level in RSI targeting the confluence of the 138.2% extension and the February highs at 8465. Note that while the structure of the advance remains bullish, a pullback here looks to target 8355 and the confluence of the 61.8% extension and the November high just above the 83-handle. Only a break below 8260 invalidates our broader bias.
USDJPY Daily Chart
Although we rarely take positions in the yen on a scalp basis, tomorrow’s print may offer opportunities as the currency typically reacts strongly to dollar developments. That said, we note key resistance at the 100% Fibonacci extension taken from the September and November lows at 83.64 with a breach above the monthly high eyeing the region between the R1 monthly pivot and the 138.2% extension at 83.85-84.00. Key support rests at the confluence of the 23.6% retracement taken from the September advance and the monthly pivot at 81.50.
For updates on these setups and more follow me on Twitter @MBForex
—Written by Michael Boutros, Currency Strategist with DailyFX
To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list
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