Daily Technical Strategist

Today's Focus: EURUSD & GBPUSD

EURUSD: Weakens, Corrects Lower.
GBPUSD: GBP Continues Trade Above Its Broken Falling Channel

EURUSD

Having hesitated and digested its run off the 1.5283 low (May 09'08), EUR weakened on Tuesday trading to as low as 1.5672. While additional downside losses can not be ruled out judging by its overbought condition which is yet to properly unwind, such weakness is expected to target and probably hold above the 1.5593 level, its May 06'08 high where a breakdown if seen could see the pair head further lower towards the 1.5360/41 area, its May 02'08/Mar 24'08 lows/.382 Ret (1.4438- 1.6018 rally) and then its May 08'08 low at 1.5283.Conversely,recovering from its Tuesday losses should open up upside risk towards its May 22'08 high at 1.5813 initially followed by the 1.5895/I 5912 area, its Mar 31'08 high/April 10'08 high ahead of its YTD high at 1.6018.Overall,medium and longer term trend remain to the upside implying that any nearer to shorter term weakness is seen as corrective.

Support	Comments
1.5593	May 06'08 high
1.5360/41	.382 Fib Ret/Mar 24'08 low/May 02'08
1.5164	.50 Ret (1.4309-1.6018 high)
Resistance	Comments
1.5710	April 18'08 low
1.5895/I 5912	Mar 31'08 high/April 10'08 High
1.6018	YTD High

GBPUSD

Although GBP traded lower to close at 1.9747 on Tuesday, as long as it continues to trade and maintain above its invalidated daily falling channel, chances for a resumption of its nearer term recovery started at 1.9362 remains with its May 22'08 high at 1.9848 coming in as the first upside objective accompanied by the 1.9963/ 2.0026 levels, its Feb 27'08/April 21 & 28'08 highs and then the 2.0191 level, its Mar 27'08 high. Further resistance stands at the 2.0396 level, its Mar 14'08 high. On the contrary, with overbought condition now a factor, a follow-through to the downside on its Tuesday losses could be seen pushing the pair towards the 1.9598 level, its April 15'08 low before the 1.9360/35 area, its 2008 lows. Its medium term outlook remains in alignment with this view. On the whole, GBP's nearer term recovery looks to stall further as upside price momentum has weakened.

Support	Comments
1.9727/19	Mar 05'08/April 01'08 lows
1.9674/53	April 25'08 low/Aug 17'07 high
1.9598	April 15'08 low
1.9360/35	2008 lows.
Resistance	Comments
1.9963/2.0026	Feb 27'08/April 21 & 28'08 highs
2.0191	Mar 27'08 high
2.0396	Mar 14'08

Mohammed Isah
Market Analyst
www.fxtechstrategy.com

This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report.

FOREX : Foreign Exchange Market

FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.

The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.

There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.

Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.

The benefits of trading with the FOREX are mentioned below:-

(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.

(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.

(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.

(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.

It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.

The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.

FOREX-DD : Forex Daily Analysis