Euro Testing Resistance, Dollar Down Ahead of FOMC

Article originally published on and republished here with permission

The safest way to double your money is to fold it over and put it in your pocket. ~ Kin Hubbard

Good morning. Euro holds onto gains fairly well and managed to recover after dropping to as low as $1.2953 yesterday, which turned out to be a corrective move. Dollar continues to push on support around 79.50 which should provide clues of further weakness towards 77 if breached, eventually. Today’s economic schedule is quite busy and there are some key events such as: German Ifo, Draghi’s Speech, Fed Interest Rate Decision and FOMC Statement

USD Index

So we’re looking at a rather classic pattern of resistance becoming pivotal support, being tested several times. While it holds, we can say that the downward movement is corrective but this is the 3rd day now and there’s no strong reversal candle to be seen around these levels, and that pops up a big warning sign suggesting that the decline ain’t over yet.

US Dollar Chart Daily 1-25-2012US Dollar Chart Daily 1-25-2012


As most short-term and intraday charts suggest these days, euro’s recovery is quite strong mainly due to mass short-covering and the positive correlation to more risk-sensitive instruments such as AUD.

EURUSD Chart Hourly 1-25-2012EURUSD Chart Hourly 1-25-2012

On the daily chart below we can see that a resistance layer formed by recent highs of December’s second half is about to be tested as price is approaching 1.3050. This is a potential breakout scenario to consider, until potential signs of a resuming decline will become obvious. For now I remain bullish on EURUSD (short-term) but not because of EUR but because of other/stronger instruments which I’m expecting to continue appreciating.

EURUSD Chart Daily 1-25-2012EURUSD Chart Daily 1-25-2012


Silver holds onto strength consolidating below 32.50-33 interim resistance, which I believe to be the next breakout zone to keep an eye on.

Silver Chart Daily 1-25-2012Silver Chart Daily 1-25-2012


Yesterday’s decline to 80.75 was indeed corrective, as mentioned in my report. The entire rally is very strong and basically this is one of the instruments EUR is following.

AUDJPY Chart 4hrs 1-25-2012AUDJPY Chart 4hrs 1-25-2012

Next upside target is best seen on the daily chart, and it’s around 83.

AUDJPY Chart Daily 1-25-2012AUDJPY Chart Daily 1-25-2012


Although EUR pulled back yesterday and .8375/00 holds, it’s still a good idea to watch this level as a breakout is likely.

EURGBP Chart Daily 1-25-2012EURGBP Chart Daily 1-25-2012


And so we’re back to yesterday’s opening levels as support at 1.29 holds. Potential breakdown is still in the cards while AUD holds below 1.30.

AUDNZD Chart Daily 1-25-2012AUDNZD Chart Daily 1-25-2012

Hourly chart looks rather scary: AUD recovered all daily losses in one hour

AUDNZD Chart Hourly 1-25-2012AUDNZD Chart Hourly 1-25-2012


About abwehra group

The Art&Science of Trading Gold
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