(Written by our editor and published in DNA Money)
August 29, 2010: Euro-dollar had a corrective rally last week bouncing off 1.2580 area which was identified as support in the previous column. The pair is still in a downtrend with prices below the 50- and 200-day moving averages.

The price action last week has not violated the support and resistance areas of 1.2550 and 1.2925 mentioned in the previous column. Till these areas are broken the EURUSD can stay range bound. The actual resistance for the pair is in a wide 75 pip range of 1.2855 to 1.2930.

EURUSD is right now in the middle of its June low and August high, which can be considered a place of equilibrium. Prices can stay rangebound in the areas where demand equals supply, which make both long and short entries appropriate at the right level. Looking forward, the pair can fall to 1.21 area if there is break of the 1.25 level and can rally all the way to 1.32 if 1.2850 is broken. This is so as there is no support after 1.25 all the way to 1.21 and no resistance after 1.2920 all the way to 1.32.

Rupee-dollar
The rupee continued its decline towards the support zone in the 47.50 area. The trend of the Indian currency is bearish, but has to break support to see further declines. Note that there was a rally in the US stock markets on Friday, indicating an increase in risk appetite, which could slow the weakening trend of the rupee in the beginning of the week.

Dollar-yen (Chart: Yen's dragon fly)
USDJPY continues to face talk of intervention from the Japanese central bank that triggers a rally in the pair, which only fizzles out later. As mentioned in earlier columns, the pair is at a major support zone between the 81 and 84 area and a sharp rally should not come as a surprise. Last time the pair touched the 84 area was in November 2009, it rallied sharply all the way to 95 a 12% rally over a couple of months. A 12 % rally is huge in the forex market.

The pair did rally nicely in the second half of last week from 83.50 to 85.50 area. The weekly charts show a bullish dragon fly candle stick which points to a further rally in price. To see the dragon fly take a look at the last candle stick. The candle stick has a small body at the top and large wick at the bottom. The wick is the result of strong buying pressure. The rally may face resistance in the areas of 85.50, 86.30 and 87.80 areas. Traders should keep in mind that resistance areas near a strong support zone are generally broken through. Hence, on the pair it's better to wait for support to go long rather than short at resistance.

Australian dollar-US dollar
Let us take a look at the AUDUSD pair, which turns bullish when commodity prices are strong. The pair had a strong rally on Friday bringing it close to a resistance area near the 0.9050 area. The break of that resistance takes the pair to the 0.9150-0.9225 resistance zone.

The pair is very close to major resistance levels, which makes going short an ideal play.

Dollar index
The dollar index went into a corrective mode after rallying into resistance last week at 83.50. In the previous week's column, we had identified 83.50 as a resistance area. The index is still bullish but has a couple of resistance areas ahead, which can slow down progress and the areas are 83.50 and 84.50.