2012.11.06 – A retracement is needed
Submitted on Mon, 12/10/2012 - 08:32
EUR/USDYesterday the pair dipped for another 76 pips from the high at 1.2842 making a retracement highly probable during the days to come. The Spanish Unemployment numbers came out much worse than expected, at a staggering 128.2K from a forecast of just 90.3K. This contributed most likely to the weakening of the Euro against the US Dollar.
Technical OutlookWe strongly believe that the pair is in need of a retracement that will probably reverse back down from the 1.2880 area of resistance. The Relative Strength Index started to move slowly up, coming from Oversold territory. We are skeptical about price reaching today the Resistance at 1.2880, but that is our short term target. If we are indeed right, we will experience a bullish day today and possibly tomorrow. If price reaches that zone and Divergence is formed, combined with an Overbought condition, we will be strongly biased towards a short trade at 1.2880 The alternate scenario of price moving down with no retracement is possible just like almost everything in the Forex market but we don’t favor it.
Fundamental OutlookUS Presidential Election day is here and all eyes are on the USA. Of course, that will be the main event today but there is a distinct possibility that the market will stall in expectation of the result. The uncertainty can reach high levels and investors will be most likely risk averse until a result is known. Time differences around the globe can also affect the market. Since our platform time is GMT, depending on the time the USA releases an official result, we could already be into the next day of trading when the name of the President is known.
GBP/USDThe GBP lost about 80 pips yesterday against the US Dollar and we consider it needs to move up a little before resuming the downside movement, just like the sister pair.
Technical OutlookToday we expect price to move slightly up and it seems like the round number 1.6000 can provide enough Resistance and it might be possible to see the move up reversing from there. The RSI is in neutral territory but it is coming from Oversold and also a bullish divergence was present. If price moves up but breaks 1.6000 Resistance, the 200 period Simple Moving Average plotted on the H1 chart can provide good resistance.