EURUSD (week: 24-28 Apr., 2006)

Last week, EURUSD embarked on a strong rally up, a rally that was somewhat expected and probably here to stay. What started as a possibly holiday-driven dollar sell-off on Monday (in spite of stronger than expected TICS data), proved to be much more than that. At the beginning of the week, EURUSD found once again good support at the lower line of the channel we already referred to in our previous reports (formed by last month's 3 tops and bottoms and now extending into April). The result of this channel line holding was a bounce up generally supported by last week's fundamentals (weak PPI data, dovish FOMC minutes, weak March housing data) and then partially cooled off by the strong U.S. CPI on Thursday and some soft data from the Eurozone on Friday.

This week, we expect this channel to remain in focus, however we see a breach above the upper trendline as imminent in the near future. Interest rate differentials still positive for the greenback failed to support a downside trend, and the picture has turned bullish once again for the pair. On the downside, 1.2280 is key support for now, followed by 1.2230. On the upside, a new successful test at 1.24 will take the pair to the upper trendline of the channel around 1.2440. Next important upper target for the pair on mid-term is 1.2560. Indicators are bullish on all hourly and daily timeframes, RSI positive. MACD is in buy position on daily, and almost turning bullish again on 4h. Weekly close above 1.2320 already confirms the full breach of this level, while an hourly close above 1.2345 (61.8% of 1.2395 - 1.2265) will confirm that this retracement move was just a corrective wave on the new uptrend.

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