DJ CHARTING EUROPE

Fri Jul 16 04:47:00 EDT 2010

USD Set To Lose More Ground Vs Majors

By Francis Bray, CFTe MSTA
A DOW JONES NEWSWIRES COLUMN

LONDON (Dow Jones)--The continuing weakness of the U.S. dollar is dominating the foreign
exchange markets Friday, as the euro rapidly approaches the psychologically-important $1.3000
level, and is close to setting fresh seven-and-a-half month lows below 86.96 against the Japanese
yen.
Thursday's strength to 1.2955 in the EUR/USD greatly increases the chance of setting a 1.30
handle for the first time since May 10, which is expected either today or early next week.
A major resistance cluster between 1.3095 and 1.3144 is the most likely area where a peak for
the short-term rally off 1.1876 will be seen. The most important component of this cluster is the
measured objective of the six-week inverse head-and-shoulders base, lying at 1.3120. A 1.618
extension target projected off the 1.2151 higher low earmarks the upper boundary of the cluster.
But if prospects for the U.S. dollar against the euro were looking bad, they are looking even
worse against the Japanese yen as pressure builds on the July 1 reaction low at 86.96.
The ease with which the spot rate has fallen from Wednesday's high at 89.12 suggests a break
below 86.96 is imminent, prompting fresh seven-and-a-half month lows towards the downwave
equality target at 85.85.
The weekly USD/JPY chart is dominated by a completed bear wedge, and the long-term bear
trend off the June 2007 reaction high at 124.14 suggests the bear wedge low at 84.82 is likely to
be tested.
Sterling shouldn't be left out of the equation either, following the 500-pip rally off Monday's low
at 1.4949.
In this case however, significant resistance is close by as the 1.5500 level approaches, ahead of
the April 15 lower reaction high at 1.5524. The 260-day moving average, effectively
representing one-year of daily trading ranges, is still falling and lies at 1.5530.
At 0828 GMT, EUR/USD is at 1.2927, USD/JPY is at 87.11, and GBP/USD is at 1.5411.

Disclaimer
(This article is general financial information, not personalized investment advice, as it does not
consider the unique circumstances affecting an individual reader's decision to buy or sell a
specific security. Dow Jones does not warrant the accuracy, completeness or timeliness of the
information in this article, and any errors will not be made the basis for any claim against Dow
Jones. The author does not invest in the instruments or markets cited in this article.)