Real FX Divergence

Written by Trade Team | 15 March 2010

Looking at a Corrective Mode on Majors

Update: Video Support on this Analysis :  http://www.youtube.com/watch?v=mkZNz8D2E1U

As the current market conditions enters its third week in Asian trading, in part of the first quarter of the year, the underlying performances of the major pairs has been more in focus with the trending cross rates like the EUR/GBP and the EUR/JPY.

This is equally true from the past weeks directional trend on both crosses. Their initial target objectives were met with a gradual market movements with sustainable volume participants in steady proportion. The EUR/GBP touching its 0.9150 close enough and was considered the first attempt to its 0.9225 levels objective on the Fibonacci retracement measure. Although, do not discount the probability for a possible second attempt. However, on a day to day basis, there maybe some corrective downward movement due to a technically motivated selling divergence and pressure to settle and liquidate on profit taking previous long positions in the market place. Some pullbacks are therefore expected while the major trend still remains to be intact.

Meanwhile the EUR/JPY 123.70 -124.05 may seem to be a very good support price levels that could be touched on a swing lower that would be an ideal time to create some long positions as it goes on ahead of the week probably more towards the Asian and European sessions. As the 4 hourly on a technical outlook has an higher opening making a diagonal line higher while the W%rate also has a diagonal line lower occurring the selling pressure in the Asian session. the same occurrence can be found on the EUR/GBP on a daily basis where a probable corrective move back to the shaded area on the left hand side in green may be filled in from the previous gap; give and take a few days to occur.

With the daily expectations for the major pairs such as the Euro and the Aussie to do the same corrective movement in line with the closing weeks of the 1st quarter. The probability is more likely that the corrective movement may occur ahead of a US Dollar decline on a slow manner. Where opening highs may appear to move higher but eventually go lower for the rest of the weeks ahead.

The same presence of a divergence occurring with the hourly charts for the Aussie and Euro are distinct in such a way that the obvious correction is in place. However, do not forget that within a major upward trend there lays a major corrective movement lower within any quarter ending of the year. These has been the true and time tested market behavior present at all times in the Foreign Exchange Market. Getting caught in-between these time frame may lead to some market volatility as position adjustments again do happen. Stick with the major trend and making use of the three methods of the Fibonacci retracement and extensions for support and resistances should be in place. More to follow in our market view and outlook within the middle of the week.

Good Luck and Happy trading !
Visit our website at : http://www.megatrade.blogspot.com for opening remarks on the FX ahead

Join us or exchange ideas, analysis and post FX articles and market outlook at a new network for Forex Traders and investors alike at http://FTXnetwork.ning.com