EUR/USD, GBP/USD Squeezed: Levels, Targets
eFXnews | May 01, 2015 06:17AM ET
While CitiFX still believes in the big picture USD story, they note that significant levels have been giving way on the Dollar Index and many USD crosses in recent days.
Thus, while Citi still maintains a long-term positive outlook on USD, in the near-term Citi thinks that we may continue to see a further sell-off. In the following points, Citi highlights the key levels in EUR/USD and GBP/USD and how far the moves may go.
"The long term price action on EUR/USD remains very similar to the trends seen throughout the 1990’s...If the correction up were to be similar, we could see 1.1262–1.1290. In terms of time we could see this consolidation continue for approximately 1 more month before the downtrend resumes," Citi projects.
"An extended move could open the way towards the 1.1533-1.1583 area, the double bottom target and February high," Citi adds
"The most important take away from the historical comparison, though, is that such squeezes/consolidations do not necessarily mean a trend change (though it can certainly feel that way). For now, we must respect the levels which have given way; however, this will likely prove an opportunity to re-enter long USD positions as the big picture dynamics suggesting we head to parity and lower remain in place," Citi advises.
In GBP/USD, Citi notes that it's now approaching the 2015 high at 1.5552, and this comes after a significant break above the 21 week moving average which has been a key level over the last year.
"A weekly close above it, which now appears likely, would suggest even higher levels may be seen. There is also positive momentum divergence, further suggesting higher levels," Citi argues.
"The next range of resistance levels above there are 1.5855-1.60 which is the converging November 2013 and October 2014 lows and the 55 and 200 week moving averages. A close above 1.5450 this month, if seen, would also result in a bullish outside month at the trend lows," Citi projects.
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