Daily Technical Report: 27 March, 2012

• EUR/USD’s latest mid-March rebound is edging higher above key level at 1.3290/95 (internal resistance).

• Only a sustained daily close back above 1.3295 and 1.3436/60 unlocks an extended recovery into our upside target zones at 1.3612/30 (200-day average).

• Meanwhile, the bears need to close decisively below 1.3140, then 1.3000 (psychological support), in order to activate an important multi-month reversal pattern into 1.2630 (16 Jan swing low).

• Inversely, the USD Index has temporarily dipped lower beneath key support at 79.07 (08 March low), with next support at 78.10.

• Expect these levels to act as one of the last points of defence for a re-launch of the greenback’s recovery which is still part of the bullish cycle into 80.73 (15th March high) and 81.78 (13th Jan swing/12 month high).

Consolidation Complete, 1.6000 Plus Levels Sighted

• GBP/USD has breached minor resistance at 1.5923 to signal likely completion of the correction of the 1.5603 advance ahead of former resistance at 1.5747.

• While 1.5770/1.5923 holds look for an acceleration of the advance through the 1.5993 February swing high towards the 1.6167 reaction high (Oct 31st) initially as the advance from the 1.5235 January low extends.

• Settlement back under 1.5770 from here would neutralise, while loss of 1.5603 would be negative increasing the risk of a return to sub-1.5500 levels in a deeper retracement of the 1.5235 advance.

Pullback Holds Around Support At 82.00

• USD/JPY’s recent pullback is holding around support at 82.00, following the DeMark™ exhaustion signal.

• Only a decisive confirmation above 83.40 and 84.18 will extend the bullish recovery which has already risen almost 10% in only 7 weeks!

• The key medium-term upside trigger level can be found at 85.50.

• Meanwhile, any further pullback could still extend beneath 82.00. A break here would unlock further moves into 81.10 (38.2% Fib) 80.00-10 (50% Fib/psychological level).

• These levels are expected to hold and offer renewed buying opportunities in our model portfolio for USD/JPY’s major long-term 40-year cycle upside reversal.

Trending Lower

• USD/CHF has broken through the 0.9071 reaction low (8th March) to extend the breakdown from 0.9335 (15th March high).

• The upside rejection from 0.9335 trapped buyers of the upside break of 0.9300 suggesting that the rebound from 0.8932 (24th Feb) was a completed correction of the decline from the January high at 0.9596.

• While 0.9071/0.9180 caps the risk is seen for an attack on the 0.8931 swing low, loss of which could see acceleration towards the October reaction low at 0.8568 next as the 0.9596 decline extends.

• We would need to see re-capture of 0.9180 to neutralise, while settlement above 0.9335 would suggest that a stronger advance can unfold towards broken support at 0.9407 initially.

Oscillating Around The 200-Day Average

• USD/CAD’s DeMark™ exhaustion buy signal remains active and price is continuing to oscillate around its 200-day average. A sustained confirmation above 1.0080 will signal a potential upside recovery.

• Such a scenario would target next resistance at 1.0160, then 1.0250 and resume the larger cycle recovery higher into 1.0424 (14th December high).

• Only a sustained break back beneath 0.9843 (03rd Jan low) would resume the multi-month downtrend into next support at 0.9726.

• EUR/CAD, which tends to share a positive correlation with EUR/USD, remains capped beneath 1.3290 (23rd March high), while unwinding from overbought conditions. A sustained downside resolution beneath support at 1.2894 (14th March low) would target 1.2760 (10th Jan 2010).

Bearish Reversal Needs To Extend Beneath The 200-Day Average

• AUD/USD’s latest bearish reversal needs to extend beneath the 200-day MA, which is currently trading at 1.0400.

• Our cycle analysis remains bearish and favours further mean reversion back into 1.0230, then 1.0146 (09th Jan low) and the parity level.

• Keep in mind that such a move would signal a break from the multi-month distribution pattern and its 3-year uptrend.

• Only a sustained close above 1.0670, then 1.0857 (29th Feb high) would put this scenario on hold and target resistance at 1.1081 (27th July peak).

• Elsewhere, the Aussie dollar is continuing to weaken against neighbouring New Zealand dollar. Key support remains at 1.2765 (27th Feb low).

• The Aussie dollar is rebounding mildly against Japanese yen, following the recent sharp setbacks. The rate is weighed by a multi-week double top pattern. Any potential mean reversion targets the 200-day average (at 81.48) and would signal unwinding of global risk appetite capital flows.

Bullish Consolidation Above 130.11

• GBP/JPY has found initial support close to the old swing high at 130.11 as the pullback from 133.50 stalls.

• While further lateral activity may ensue between 130.11 and 133.50 over the short-term dips look to be limited prior to an extension of the bull run for the 135.11 reaction high (31st May) over coming sessions.

• The big picture remains bullish following completion of a major base pattern and so corrective weakness beneath 130.11 should be limited to the 126.55/127.32 region prior to basing for fresh gains.

• Failure to hold above 126.55 would warn that the structure from 116.84 was a corrective phase, with risk then for a return to 121.69 initially as bears gain control.

Corrective Activity

• UR/JPY has entered a period of consolidation after gains which followed the breach of the 109.93 swing high stalled at 111.44, although 108.50 is holding for now.

• While we could see further corrective activity to unwind the latest bout of strength over the next few sessions the structure remains positive, with pullbacks expected to be limited to the 108.50 area prior to basing for an extension of gains through 111.44/111.60 towards 114.17.

• Settlement below 108.50 from here would increase risk of a return towards 105.65, below which would suggest completion of a top pattern threatening a return to 101.83 initially.

Grinding Higher

• EUR/GBP is probing higher having failed to sustain the downside break of support at 0.8315 over the past week or two.

• While we could see further sideways/higher action over coming sessions as the cross settles into a 0.8300/0.8400 band the overall tone remains heavy while resistance at 0.8400/0.8435 caps, with the downtrend targeting support at 0.8264 then 0.8222 in due course.

• Settlement back above 0.8400/0.8425 would be positive suggesting scope for a re-test of the swing high at 0.8506, above which would signal a possible return to the 200 day moving average, currently at 0.8620.

Minor Bounce From Range Floor

• EUR/CHF is showing early signs of basing in the 1.2000/1.2040 support zone as the cross sees listless trade within the range.

• While short-term activity could remain subdued the overall tone remains negative after the failure to sustain the break above resistance at 1.2127 and while 1.2100/1.2127 caps, we see risk of an attack on 1.2000/1.2040, below which could then see an acceleration of the major downtrend towards 1.1500.

• Settlement above the 1.2100-1.2127 zone would suggest base pattern completion calling for a return to broken support at 1.2226, above which would turn the focus to the 1.2474 swing high.

Gold Retests Its 200-Day Average

• Exited at $1670 (breakeven), having achieved our first profit target. Gold is retesting its 200-day average, while unwinding from oversold conditions. The move follows gold’s latest reversal which was triggered by a DeMark™ exhaustion signal.

• It is worth remembering the dramatic $103 one-day drop which will continue to offer psychological pressure for investors and traders.

• Watch for a sustained break below support at $1628, then $1600 (psychological), then $1567 and $1522 (29th Dec swing low).

• A sustained confirmation beneath here would resume risk for a much larger decline that we have been anticipating. Keep in mind that our cycle analysis continues to highlight initial downside targets into $1460 and $1300.

• This would likely trigger a temporary, but dramatic setback that would ultimately offer a unique tactical buying opportunity into this coming summer of 2012.

• Only a sustained confirmation above $1810 will put the bearish scenario on hold and offer further extended recovery higher on gold.

Bullish Rebound Targets Key Level At 33.8200

• Exited at $32.9480. Silver’s latest rebound from oversold conditions now targets near-term resistance at $33.8200.

• The move follows silver’s bearish reversal signal that was triggered by our DeMark™ exhaustion signal on 28th Feb.

• Failure to confirm above $33.8200 and $34.5394 (200-day average) will resume downside pressure.

• Watch near-term support at $31.6225 to unlock sharp setbacks back into $30.0000 (psychological level) and $28.9525.

• Meanwhile, the bulls need to push back above the 200-day average to maintain any potential recovery into $37.4750 (29th Feb high).