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EURUSD: Sets Up For Further Weakness

EURUSD: With further downside momentum continuing to be seen, EUR now looks to weaken further towards the 1.4020/00 levels, its mar 28’2011 low/psycho level.

This zone is expected to hold as support on an initial test and turn the pair back up. However, if it breaks, further declines are likely towards the 1.3852 level or even lower towards the 1.3754 level, its Mar 11’2011 low.

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Alternatively, the pair will have to invalidate the 1.4339 level and the 1.4422 level to halt its present bear threats and then create scope for further strength towards its May 06’2011 high at 1.4586 and ultimately the 1.4938 level, its 2011 high. In the absence of the above, our bias remains to the downside nearer term.

EURGBP: Threatens The 0.8672/62 Levels

EURGBP- A flat close on Tuesday saw the pair threatening further downside pressure towards its Monday low at 0.8662.

We expect the 0.8672/62 zone to hold and turn off the cross just as it did in the past but if this fails, the 0.8532 level and probably the 0.8500 level, its psycho level will be targeted.

A halt in weakness is expected at that level to turn EURGBP higher if tested. Alternatively, a return above the 0.8896 level, its May 05’2011 high will put a hold on the cross’s present bear threats.

This will set the stage for more gains towards the 0.9040 level, its year-to-date high. A break of the latter level will resume its long term uptrend and target further gains.