EURUSD – Euro/dollar continues to weaken after gap down

The EURUSD opened this week with a large gap down of over 160 pips, this came on the back of some news over the weekend regarding Cyprus debt problems and how it might affect the euro-zone economy. Regardless of why the gap formed, the important thing to note is that the EURUSD downtrend is still intact and this market is looking increasingly weak lately. Note that the market did try to fill the week-opening gap but only managed to fill it about 50% of the way before reversing lower again. As of this writing, into the early-Asian trading session, the market is already threatening to break below key support near 1.2875 again, and if this bearish momentum continues we could see a larger move lower. The next key support is not seen until about 1.2660, traders can continue to watch for price action signals to sell and trade in-line with the downtrend in this market.

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Weekly Price Action Trading Outlook for March 25th to March 29th 2013

EURUSD – Euro/dollar remains a potential sell below 1.3135 resistance

The EURUSD managed to hold above key support at 1.2875 last week, moving higher into Friday’s close after chopping sideways earlier in the week. This week, as long as the market is contained below 1.3135 key resistance on a closing basis, we are looking to sell the market on an obvious 4 hour or daily chart price action sell signal. Traders can watch the resistance from current levels to up around 1.3135 for a nice 4 hour or daily chart pin bar sell signal for fakey signal to trade back in-line with downtrend. A close above 1.3135 would neutralize our current bearish bias.

GBPUSD – Sterling/dollar pushing up toward weekly resistance

The GBPUSD has regained some of its recently lost ground over the last two weeks as we can see in the weekly chart below. We should note that the long-term trend is still down and this current up move is simply a counter-trend retracement within that broader downtrend. Still, the daily chart has shown some strength over the last two weeks and we have to respect that strength until the price action shows us it might be ending. We would note that in the weekly chart below the market is approaching a key zone of resistance from about 1.5250 up to 1.5450, and any obvious 4 hour or daily chart sell signal forming within that resistance area could be a potential trigger for the downtrend to resume. A nice daily chart long-tailed pin bar reversal showing rejection of that resistance would be an ideal sell signal to watch for in the coming days.

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Forex - EUR/USD falls as Cypriot bailout optimism wanes

The euro fell against the dollar on Monday after investors grew wary of the impacts a European bailout will have on Cyprus even though the country will remain in the eurozone.

Earlier Monday, eurozone finance ministers and the International Monetary Fund approved a EUR10 billion rescue package for Cyprus provided the country close up its second-largest lender, Laiki Bank.

In U.S. trading on Monday, EUR/USD was down 0.85% at 1.2880, up from a session low of 1.2866 and off from a high of 1.3048.

The pair was likely to find support at 1.2844, Tuesday's low, and resistance at 1.3048, the earlier high.

The bailout deal guaranteed that accounts holding EUR100,000 or less will continue to be insured and likely shifted to another financial institution, though larger depositors and bondholders in the bank will take a haircut, which sent the euro wiping out earlier gains. 

Eurogroup head Jeroen Dijsselbloem said earlier terms of the rescue package may serve as a template for other European bailouts, which rattled nerves on expectations that future financial lifelines may require banking-sector restructurings.

Markets were eagerly awaiting Federal Reserve Chairman Ben Bernanke to speak later in the day and provide insight into U.S. monetary policy, which the U.S. central bank left unchanged last week.

The euro, meanwhile, was down against the pound and down against the yen, with EUR/GBP trading down 0.49% at 0.8488, and EUR/JPYtrading down 0.88% at 121.67.

On Tuesday, Germany is to produce official data on retail sales, a key indicator of overall economic health.

Later Tuesday, the U.S. is to release a flurry of economic data with government reports on durable goods orders and new home sales as well as a report on consumer confidence.

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