Forex News: Bullish Run Continues. Overbought Levels Signal Pullbacks
Forex News: Price action remained bullish yesterday but without any major developments coming from the fundamental scene. The pair reached the long term resistance at 1.2280 and bounced lower.
The massive bullish rally seen last week and yesterday has brought the pair into the resistance at 1.2280 and the Relative Strength Index in deep overbought territory. These two facts will most likely trigger a pullback today but after its completion, we expect the pair to break 1.2280 – 1.3000. If that happens, the pair will be in “uncharted” territory until it reaches the zone around 1.2600.
Both the Euro and US Dollar have a slow economic day ahead, without any notable releases, so the technical aspect will take center stage.
The US Dollar couldn’t make any advances against the Pound, although some attempts were made, so the pair continued higher. This was a continuation of the momentum started last week, not the result of new developments on the fundamental scene.
The bulls are in clear control but the possibility of a retracement lower is higher than it was yesterday, due to the long distance travelled upwards in a short period of time. The RSI and Stochastic are extremely overbought, thus increasing the chances of a pullback. The levels to watch are 1.3745 as potential support and place where bullish movement may resume and 1.3860 as resistance.
The day’s main event will be the release of the British Consumer Price Index, scheduled at 9:30 am GMT and expected to show a yearly change of 3.0% compared to the previous 3.1%. This is the main gauge of inflation, showing changes in the price that consumers pay for the goods and services they purchase. The indicator usually strengthens the Pound if it posts readings above forecast.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 8-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.