Daily Technical Report: March 27, 2012

• EUR/USD’s latest mid-March rebound is still being capped under key level at 1.3290/95 (internal resistance).

• Only a sustained confirmation back above 1.3295 and 1.3436/60 unlocks an extended recovery into our upside target zones at 1.3630 and 1.3612 (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 (January 16 swing low).

• Inversely, the USD Index is continuing to hold steady above key support at 79.07 (March 8 low).

• Expect this level 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 (March 15 high) and 81.78 (January 13 swing/12 month high).

Consolidation Holding Above Support

• GBP/USD is consolidating ahead of the 1.5700/1.5747 support zone as the correction of the 1.5603/1.5923 move nears completion.

• The velocity of the 1.5603 advance combined with completion of a bear trap below 1.5645 suggests that an important reaction low has formed at 1.5603, most likely setting the stage for a resumption of the advance from the 1.5235 January low.

• From here, we look for broken resistance at 1.5747 to contain dips for an attack on the 1.5993 February swing high, breach to signal an acceleration towards the 1.6167 reaction high (October 31) initially.

• Settlement back under 1.5700/1.5747 would neutralise while loss of 1.5603 would be negative, risking a return towards 1.5500 initially in a deeper retracement of the 1.5235 advance.

Pullback Holds Around Support At 82.00

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

• 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.

Limited Upside Scope.

• USD/CHF is seeing some corrective activity after breakdown from 0.9335 (March 15 high).

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

• While 0.9300/0.9335 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 as the 0.9596 decline extends.

• We would need to see settlement above 0.9300/0.9335 to suggest that a stronger advance can unfold, with scope then for further headway towards broken support at 0.9407.

Oscillating Around The 200-Day Average

• USD/CAD’s DeMark™ exhaustion buy signal remains active and price is now oscillating positively 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 (December 14 high).

• Only a sustained break back beneath 0.9843 (January 3 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, has triggered a bearish daily reversal pattern, while unwinding from overbought conditions. A sustained downside resolution beneath support at 1.2894 (March 14 low) would target 1.2760 (January 10, 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 (January 9 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 (February 19 high) would put this scenario on hold and target resistance at 1.1081 (July 27 peak).

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

• The Aussie dollar 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.

Corrective Activity

• GBP/JPY is seeing some corrective activity after gains following the breach of the 130.11 swing high stalled at 133.50.

• The breach of 130.11 signalled completion of a corrective pullback at 126.55 and while we could see further corrective activity to unwind gains we look for 130.11 to hold for an acceleration towards the 135.11 reaction high (May 31) over coming sessions.

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

• Failure to sustain gains 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.

Corrective Weakness

• EUR/JPY has entered a period of consolidation after gains which followed the breach of the 109.93 swing high stalled at 111.44.

• While we could see further corrective activity to unwind the latest bout of strength over the next few sessions the structure continues to look positive, with pullbacks expected to be limited to the 107.52/108.65 congestion prior to basing for an extension of gains through 111.44/111.60 towards 114.17.

• Settlement below 107.52 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.

Limited Upside Scope

• EUR/GBP is correcting higher having failed to sustain the downside break of support at 0.8315 on the latest downside probe.

• While we could see further sideways/higher action over coming sessions as the cross settles into an approximate 0.8300/0.8400 trading band, the overall tone remains heavy while resistance at 0.8400/0.8435 caps with the major downtrend targeting support at 0.8264 and 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.

Listless Trade Within The Range

• EUR/CHF has gravitated back towards key support at 1.2000/1.2040 after rejection from 1.2147 as EUR/CHF settles back into the old trading range.

• The failure to sustain the break above resistance at 1.2127 suggests a resurgence of bear pressure, and while 1.2100/1.2127 caps we see renewed 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 Remains Beneath Its 200-Day Average

• Gold's latest reversal, triggered by a DeMark™ exhaustion signal remains beneath its long-term 200-day average (currently trading at $1686).

• 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 (December 29 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.

Downside Pressure Remains For $30.0000

• Silver’s downside pressure remains after extending from its bearish reversal signal that was triggered by our DeMark™ exhaustion signal on February 28.

• The move is still holding beneath its 200-day average which is currently trading at $34.5394.

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

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