Yesterday, the greenback moved sharply higher against the British pound, which approached GBP/USD to the previously-broken August peaks. Will this support manage to stop currency bears in the coming days?
EUR/USD
Looking at the charts, we see that EUR/USD slipped slightly below the previously-broken 38.2% Fibonacci retracement (seen on the weekly chart) and the 23.6% retracement (based on the entire April-September upward move), which suggests that further deterioration is just around the corner.
If this is the case and the exchange rate extends losses, we’ll see a realization of the pro bearish scenario from our Forex Trading Alert posted on September 25 in the coming week:
(…) we clearly see a potential head and shoulders formation. Therefore, if EUR/USD declines under the neck line of the pattern (the blue support line based on the previous lows), we’ll see a downward move to around 1.1596, where the size of the move will correspond to the height of the formation.
However, when we take into account a drop under the lower border of the brown rising trend channel and the broader picture of EUR/USD, we think that currency bears push the exchange rate even lower – to around 1.1508, where the size of declines will be equal to the height of trend channel. Taking all the above into account, we believe that our (already profitable) short positions are justified from the risk/reward perspective.
Very short-term outlook: bearish
Short-term outlook: bearish
MT outlook: mixed
LT outlook: mixed
GBP/USD
Quoting our Forex Trading Alert posted on September 25:
(…) How low could the pair go? In our opinion, if the exchange rate moves lower from current levels, we’ll see a drop to around 1.3266-1.3291, where the 38.2% Fibonacci retracement based on the August-September upward move and the August high are.
