Forex Daily Analysis 2012-02-27

The US stock markets made the unbelievable and completed another green week. Indices rose 0.3% as the S&P 500 is touching the pick at 1370 points and although many analysts estimate that the correction will come soon, there is a good probability that we will see continuation of the rally. Many hedge funds are waiting for a correction of 5%-10% but the indices have traded around the current highs for several days without correcting and this is a sign for another break-up. If the S&P 500 breaks through 1370 points, the hedge funds managers will have no choice but to join the market and this might push the stocks even higher. The main elements that could threat this rally are obviously the European debt problem and the rally of the oil price which is about to cross above 110$.
EUR/USD
The continuation of the strengthening of the stocks weakened the USD against most of the major currencies. Before the previous weeks started, the EUR looked like it was about to correct down, but eventually it opened the week with a gap-up and completed the "cup & handle" pattern under the resistance at 1.33. The EUR successfully broke this pattern and reached the target we set at 1.35 within just two trading days. The next significant resistance is close to the 200 SMA at 1.37, but do not eliminate the option for a bearish correction that will retest 1.33.

GBP/USD
The pound looked extremely weak against the USD on the first days of the previous trading week, but a strong finish took it to the week's height. There was a strong support to the pair at 1.565, which we estimated that a strong break-down of this support would cause sharp declines. However, the support was strong enough and the triple-bottom pattern signaled for the incoming bullish session. The pair broke-through the resistance of the downtrend line and reached the 200 SMA, as a strong break-up of this moving average might take the GBP up to 1.60.

USD/CHF
The CHF broke-down the bearish pattern of the "Head & Shoulders" and might start a significant strengthening movement against the USD. The pair was traded around the support at 0.91 for several weeks and it looked like that each break-down was actually a false-break, but last week the break-down was real and the CHF is already under 0.90 versus the USD. The target for the current session is the 200 SMA at 0.87-0.88.
The main concern of the CHF buyers is an aggressive intervention by the SNB in case the CHF gets too stronger according to the central bank's point of view. This threat definitely real since the SNB has announced before that t would not hesitate to interfere if it needed.

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