FOREX TECHNICAL ANALYSIS: DOWNTREND LOSES STEAM. NEW LOWS STILL A DISTINCT POSSIBILITY
Posted → Weekly Commentary
EUR/USD
Forex Technical Analysis: Last week we had the first significant bullish move in a long time on the back of both technical and fundamental reasons. However, the second part of the week belonged to the bears as the US Dollar regained its strength.
Technical Outlook
Last week�s strong price action pierced through two resistance levels: 1.2660 and 1.2750 but the Weekly candle closed below these levels. At the moment we can see a long upper wick and this is a sign of rejection and underlying US Dollar strength. The Relative Strength Index is starting to move upwards, coming out of oversold territory, a thing which suggests that we might see more upside movement. The signals are pretty mixed but keep in mind we are in a downtrend and this increases the chances of a new low.
Fundamental Outlook
US banks will be closed Monday, celebrating Columbus Day and Europe doesn�t release any major indicators but the Eurogroup Meetings take place and this may be a reason of volatility. The German ZEW Economic Sentiment survey is Tuesday�s main event while Wednesday is a busier day: ECB President Mario Draghi will speak at a Conference organized by the European Central Bank and the US Retail Sales come out, together with the American Producer Price Index.
The Philly Fed Manufacturing Index is released Thursday while Friday�s main event will be a speech of Fed Chair Janet Yellen. The final event of the week is an American Consumer Sentiment survey released by the University of Michigan.
GBP/USD
Bank of England decided to keep the interest rate unchanged and the week was bullish but some downside action was seen during the last two days. The Pound is starting to gain against the greenback but a downtrend is still in place.
Technical Outlook
During the first part of the week price came close to the major resistance at 1.6250 but the bulls ran out of steam before this level could be seriously threatened. At the moment, downside movement is rejected by the support at 1.6060 and bullish divergence is present on a Daily chart (lower low on price � higher low on RSI). These factors increase the chances of a move into 1.6250 resistance but there is still a lot of US Dollar strength and a break of 1.6060 will make 1.5900 the next destination.
Fundamental Outlook
The British Consumer Price Index, which is the main inflation gauge, is released Tuesday, followed Wednesday by the Claimant Count Change which shows the change in the number of unemployed British people. These are the only notable events for the Pound this week but the pair�s direction will be influenced by the US releases as well.
Written by: Bogdan Giulvezan