Euro And Pound Focus Draws Most DailyFX Analysts To The Majors

Daily Forex Technicals | Written by DailyFX | Nov 04 08 14:46 GMT |

Volatility has settled into the new week and the aggressive trends behind the euro and British pound have stalled in response. Congestion cannot last for long however; and technicals mark clear lines in the sand for eventual breakouts. Read on to see how each of our analysts is positioned and what their outlook for how market conditions will develop. Senior Currency Strategist - Jamie Saettele My picks: Update on yesterday's EURUSD and GBPUSD longs (from 1.26 and 1.5740) Expertise: Technical Average Time Frame of Trades: 1 month Review from yesterday: "The EURUSD and GBPUSD are likely to gain in November. Both exhibited the largest monthly range on record last month (put up a monthly chart with 1 ATR to view this yourself). This is a sign of capitulation and indicates a sentiment extreme. COT continues to favor the EUR and GBP as well. In the case, of the GBP, price is supported by a 24 year trendline. The levels to begin positioning long are 1.26 and 1.5740. These are congestion levels that should provide demand. Last month's lows are stop levels." Move risk on the EURUSD to 1.2525 and risk on the GBPUSD to 1.56. Risk has been decreased substantially. Exit half of the EURUSD long at 1.2990 and exit half of the GBPUSD long at 1.6250. This is to ensure that some gains are locked up given the possibility that both pairs are still in a larger range such as triangles). Currency Strategist - Terri Belkas My picks: Long EUR/JPY on a break above 128 Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 - 3 Days Stock markets in Europe are picking up pace while DJIA and S&P 500 futures are signaling a strong open today, suggesting an improvement in investor sentiment that could benefit the JPY crosses throughout the day. Focusing on EUR/JPY, the pair continues to consolidate just under trendline resistance on the hourly charts at 128. I'm looking for EUR/JPY to break above that level to target 135.17 (the 50% fib of 156.82-113.60). However, with the ECB scheduled to announce their rate decision on Thursday morning, I would try to exit the trade before then. Currency Analyst - David Rodriguez My picks: GBP/USD short Expertise: System Trading Average Time Frame of Trades: 2-10 weeks As I mentioned in Friday's Technicals report, I believe that the US dollar may continue to regain ground against the British Pound. My only concern at the moment is that the pair may correct through the near-term before continuing downward. That said, I favor staggered entries. I'll sell some now all the way up to 1.6398 if the pair manages to correct its most recent weakness. Yet I'll close my positions on a break above key Fibonacci resistance at the 1.6650 mark. Currency Analyst - Ilya Spivak My picks: GBPUSD Short (pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months The British Pound is positioned in a very similar fashion to what we discussed for the Euro, showing a falling wedge formation with positive divergence on the 14-day RSI oscillator. We continue to expect that the dollar will lose a bit of ground in the coming days, opening the door for a validation of this technical setup with a bulish swing to offer a shorting opportunity. The up move would come courtesy of normalizing stock market conditions: we have recently observed a -91% inverse correlation between the US Dollar and the MSCI World Stock Index. As capital leaves the safe haven of the greenback and returns to risk, stocks are likely to rise while GBPUSD corrects higher. Initial resistance is seen at 1.6534, the intersection of the wedge top and the 38.2% Fibonacci retracement of the 09/25-10/27 decline. Currency Analyst - John Rivera My picks: Short EUR/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days The ECB is expected to cut rates by 50 bps on Thursday and the Euro recent appreciation on the back of risk appetite presents a solid entry point to short the EURUSD. I am expecting President Trichet to signal at further easing which may see the pair look to test the 1.2000 price level. Regardless of the outcome of the policy decision the expectations of prolonged easing should lead to the Euro trading heavy leading up to the rate decision. Currency Analyst - David Song My picks: Short EUR/USD Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days I anticipate the EURUSD to fall lower over the next few days as the European Central Bank is widely expected to lower the benchmark interest rate by 50bp to 3.25% on Thursday. Despite the anticipate rate cut by the ECB, Credit Suisse overnight index swaps are showing that market participants expect the central bank to lower borrowing costs by at least 125bp over the next 12 months, which would stem increased selling pressures for the euro going forward. In addition, the EU Finance Ministers announced that they decided to reject a joint stimulus package despite fears of recession, which suggests that the ECB could be forced to increase their efforts as lawmakers continue to sit on the sidelines. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. 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