FX Market weekly outlook

31 October, 2016

EUR/USD

The Euro ended last week in the positive territory after we saw strong support around the 1.0850 area. Looking at the technical picture for this pair, we can see that the daily trend remains below 1.1280 peak, therefore the current recovery is likely to be short-lived.

Regarding the short-term price action, the single currency showed a double zigzag corrective pattern with another extension higher in the focus that can reach as high as 1.1030/40 before the decline resume. In the meantime, a clear bullish engulfing candle emerged in the weekly chart, which reinforces the probability of a larger correction to the upside in the coming days. As of the week ahead, traders should focus on the mentioned above resistance zone, from where strong sellers may appear. In extension, a daily close above this zone, should clear the path for a re-test of the 50-61.8% retracement from 1.1280 high, located between 1.1065-1.1116. In the opposite, a daily close below 1.0900-1.0880 zone is needed to confirm that the bearish momentum renewed.

GBP/USD

Cable continue to trade sideways in the hourly chart between 1.2330 in the upside and 1.2085 support in the downside, which keeps the short-term view unclear for the time being.

Meanwhile, we will focus on 1.2113 support level in the coming days as it represents Friday low and a breakdown below it may trigger another decline towards the major support of 1.2085, while a daily close below this figure will confirm a big plunge in the British pound for the days ahead.

In the other side, a move back above 1.2200 handle will expose 1.2250/70 resistance zone while a daily close above it should confirm a temporary bottom in this pair, and at that time another rally in the direction of 1.2330 peak cannot be ruled out.

Overall, the short-term trend is neutral in this pair, consequently, we should wait for the break of one of those key technical levels to get more clues about the future possible price action.


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