2012.11.12: Another trend line bounce?

EUR/USD

Euro seems to be losing more and more strength against the US Dollar, constantly making new lows and with all retracements reversing once they touch the down trend line drawn on the Hourly chart and seen in the picture below.

20121112 - Another trend line bounce-Picture 01

Technical Outlook

Everything on our charts is pointing down, indicating that the pair is not ready yet to start moving up and more bearish movement is expected. Given the fact that 1.2700 is a round number and a possible rejection level, we are expecting a move up towards the trend line before the sellers will take back control. Like we said in our weekly outlook article, a touch of the 1.2830 Resistance level is possible during the week, but Monday is a slow day usually and a 130 pip move up is highly unlikely so any retracement should reverse from the down trend line. There is a possibility for price to move higher above the trend line and if this indeed does happen, we must be very careful not to get caught in a false break. All breakouts should be confirmed by strong candles and momentum on the higher time frames.

20121112 - Another trend line bounce-Picture 02

Fundamental outlook

Today it’s bank Holiday for the USA and Canada and we expect the New York session to be a low volatility one, with little movement. The Eurogroup Meetings are held today in Brussels, attended by Finance Ministers of the Euro zone member states and the President of the ECB, Mario Draghi. The meetings are held during the day but are closed to the press; however, some of the attendants usually speak to the journalists and a statement may be released after the meetings are over.

GBP/USD

After a consolidation period during last week, price finally broke out to the downside on Friday morning and continued in that direction throughout the day. The consolidation does not look like a picture perfect horizontal channel, but each time price tried to get out, it failed and returned inside the consolidation area:

20121112 - Another trend line bounce-Picture 03

Technical outlook

Now that price is finally out of consolidation, we are expecting more downside movement today during the European session. A re-test of the broken Support is possible given the fact that RSI is almost in Oversold territory and some bullish divergence is already present on the H1 chart. Once the retracement is over, the downtrend will probably resume.

Fundamental Outlook

Other than the Eurogroup Meetings held in Brussels, no other significant financial or political events are expected today so the technical aspect of the market is the one to keep an eye on.