NEW YORK, June 25 - The following is a selection of comments on important technical developments in the foreign exchange market.
JOSEPH KLETTNER, TECHNICAL ANALYST, COMMERZBANK:
EURO/DOLLAR: "Last week's slide from $0.8673, the June 15 high, violated key support at 85.42/06 on Wednesday when prices reached a low of 84.96. Wednesday's violation of support may have been a false move to the downside since no follow through has been seen since. We are still favoring the idea of a false breakdown for two reasons. First, the rally from Wednesday's low made new highs by the end of the day. Second, the 3-day swing chart had turned down at 84.96 for the first time since it gave a buy signal on June 13. Downswings in up-trending markets are considered a buying opportunity. It so happened that this downswing had violated the weekly support in the process but that didn't effect the trend which will remain ullish as long as prices hold above 84.11, the prior pivot low.
DOLLAR/YEN: "The decline from the May 16 high of 124.05 yen was the beginning of wave-c, the third step in the a-b-c consolidation from 126.84, the April 2 high. The wave-c decline from 124.05 unfolded in a 5 wave pattern into the June 1 low of 118.30. Wave-c low of 118.30 came close enough to satisfying our target of 118.11, the level where wave-c decline from 124.05 equaled the distance traveled in wave-a (126.84-118.30). Since then, prices have rallied to 124.74. Along the way initial resistance was penetrated at 119.84/120.20 and then the resistance of the declining 45 degree trendline was penetrated at 120.80. This was followed by an advance through 121.38, the last swing high on the short-term 3-day swing chart and then a move above 123.57, the 61.8 percent retracement of the decline from 126.84 and final a move above 124.05 on Wednesday which flipped the medium-term weekly and 7-calendar day swing charts into bullish territory. "The advance from 118.30 has given us enough evidence to support our bullish count and the likelihood that wave-c has bottomed. Now that these resistance levels mentioned above have been achieved, the focus now shifts towards 126.84, the April high. The only resistance between Friday's close and 126.84 is 125.69, the upper 2 percent trading band. Setbacks in the meantime should hold support between 123.65/29."
STERLING/DOLLAR: "The short-term trend has remained bearish ever since the decline from the May 21 high of $1.4416 violated 1.4263, the last swing low on the 3-day swing chart. The break of 1.4263 saw prices slump to 1.3682 on June 12 (a 15-year low). Since then prices have rallied back sharply to 1.4194. During its recovery the market penetrated important short-term resistance at 1.3920 which represented the declining 45-degree trendline on the chart. "Cable slipped back to 1.3906 stopping just above 1.3896, last week's support and the 50 percent retracement of the advance from 1.3682 to 1.4110. The decline to .3906 alleviated some of the frothiness of the advance which left the pound poised to continue toward Thursday's high of 1.4177. If another setback develop, we could see prices testing support between 1.4050/14 before the advance resumes. This area should hold if the rally from last week's 1.3682 low stalls into some heavy resistance situated around 1.4244/1.4325. This area contains the next key pivot long- term trendline esistance with respect to the short-term trend of the market. Violating it would confirm that 1.3682 was an important bottom from where a rally to 1.5105, the previous fourth wave will now develop."
DAVID SOLIN, PARTNER, FX ANALYTICS RESEARCH:
STERLING/YEN: "Consolidating after last week's test of the 176.25/75 yen area (both the three-year bearish trendline and the potential right shoulder of a possible 18 month head-and-shoulders pattern). Though risk exists for further near-term top building, it would be seen as a good risk/reward chance to sell as at least a minimum 300bps retracement (and potentially much more) is overdue. However, the long term remains positive as the clear 5 wave rally from the September 2000 low suggests an eventual new highs (though there is some chance of another test of the 165.50/00 low and even slightly below to complete the correction since April first)."