10 October, 2016
The Euro remain strong compared to a basket of major currencies as the single currency managed to protect 1.1100 psychological support despite the recent strength seen in the U.S Dollar during last week.
Technically, the pair keep trading inside a wide range that comes from 1.1250 resistance to 1.1120/1.1100 support zone and only a clear break outside of this sideways formation, should provide more clues about the future price action in the coming days. Consequently, our view remain neutral regarding this pair.
Looking at the levels of interest for the week ahead, traders should focus on 1.1240/50 in the upside while in the downside, a breakdown below 1.1150 should open the way for further downside in the direction of 1.1100 handle.
The pair fell to lowest level since March 1985 during early Asian session trading as algorithms intensified the sell-off.
The Sterling sank to as low as 1.1841 shown in Bloomberg reinforcing the bearish outlook that followed the recent Brexit decision. As of now, it is clear that cable remain under pressure, however traders should approach this pair very cautiously in the coming days as we have seen a strong bounce from the lows.
From a technical standpoint, the pair should follow two different paths in the near-term. Either a recovery towards 1.2540/60 before the sell-off or a continuation lower if 1.2485 peak holds.
For the second scenario, a daily close below 1.2225 support is needed for another dip in the direction of 1.2060/1.1960 support zone, from where a potential major low is likely to be found in the coming days.
Overall, the pair remain strongly bearish in both the hourly and the daily chart, which keeps the preference for selling rallies instead of buying the dips. In the opposite, a break above 1.2770 peak should confirm a potential bullish reversal.
The Japanese Yen has weakened significantly last week as traders began to book profits on their short positions since the beginning of this third quarter.
Technically, the short-term trend has turned bullish and as far as prices keep trading above 100.75 support, another extension higher remain possible. Therefore, if Friday’s drop continue during the beginning of the coming week, then we expect strong buyers to appear around 102.10/101.65 zone as these levels represents the 50-61.8% fibonacci retracement of the entire recovery that began from 100.08 low.
In the flipside, a daily close above the psychological of 104.00 is necessary to support the reversal outlook.
From a wider angle, the daily trend still bearish and as far as 104.30 peak is intact , the probability of a major bullish reversal reversal will remain weak.
The pair ended last week on a positive note as prices managed to overtake 1.3280 weekly resistance despite strong employment figures from Canada on Friday.
The pair fell to a low of 1.3185 following the release before to bounce strongly, reinforcing the positive outlook in the short-term. Consequently, as far as this low remain in place, another rally in the direction of 1.3400/1.3430 resistance zone remain highly possible during the week ahead.
In addition, Oil prices began to show some signs of weakness around $50 psychological resistance, which can give another push to USD/CAD.
Looking at the daily chart, the pair has been in a consolidation phase for more than 3weeks and we have seen on Friday a daily close above the 200daily moving average, signaling that bulls have potentially won the battle and overtook the control of this pair for the time being. In the meantime, the weekly RSI indicator crossed above its 50 neutrality zone while the candle close showed a strong bullish engulfing for the previous 2weeks.
To summarize, the pair is ready for a big rally in the coming days and only a close below 1.3185/50 support zone will cancel this positive view.
The Aussie retreated below 0.7590 daily support after the pair showed a potential head and shoulders reversal pattern. In addition, prices broke below the mentioned above support as it represent the neckline for this bearish formation. Therefore, prices should remain under pressure in the near-term and another wave lower should begin towards 0.7530 support.
In the opposite, the negative picture should remain unchanged as far as 0.7645 peak is in place.
To conclude, the Australian Dollar began to lose its bullish momentum and a confirmation for the negative signals given in the previous week is expected. Traders should focus on 0.7645 resistance as only a break above it will cancel any negative attempt.
The New Zealand Dollar was one of the worst performer in the recent days. Prices have confirmed the head and shoulders pattern shown in the 4hour chart, as the break below 0.7200 psychological support triggered a big sell-off in the kiwi.
For the week ahead, we expect the weakness to resume in this pair, however when looking at momentum indicators we can a clear oversold condition, which can lead to an upside correction in the short-term. This potential recovery can reach as high as 0.7220/45 zone before to find strong resistance for another extension lower in the direction of 0.7085 weekly support.
In the other side, the bearish outlook will remain strong as far as 0.7310/30 barrier is intact.
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