Daily Forex Market Preview, 21/10/2016
The ECB monetary policy meeting yesterday saw the euro give up its intraday gains to close on a bearish note. As Draghi signaled that the central bank would need time to assess the monetary policy situation, the euro plunged and is now trading near the levels were last seen in January this year. Still, the declines are likely to be limited in nature as the US dollar approaches the key resistance level near 98.50. With the week coming to an end, the main catalyst for the markets will be next week which will see the US advance GDP report that could be the main event risk.
EURUSD Daily Analysis
EURUSD (1.0968): EURUSD was bearish yesterday despite the modest attempt to test 1.1000 resistance level that was quickly rejected. Price action is likely to settle lower near 1.0900 as we see currently and this marks the completion of the head and shoulders pattern. A correction to the upside, therefore, cannot be ruled out. While 1.1000 resistance level will be challenged initially, the further upside can be seen coming above this level towards 1.1100. To the downside, price action could be seen consolidating near 1.0900 - 1.0850.
USDJPY Daily Analysis
USDJPY (104.07): USDJPY closed back near the 104.00 level yesterday moving back into the inside bar range level established from last week. Price action continues to evolve into the head and shoulders pattern which has been redrawn with price action currently trading near the previously identified resistance level of 104.34 - 104.20. A bearish follow through is required here to ascertain the downside bias which puts the downside bias to the 101.61 - 102.00 support level. The Stochastics oscillator is seen near the overbought level currently, and a lower high formed here could signal the downside. Alternately, with the previous 4-hour session closing bullish after the doji, further upside could be expected. A daily close above 104.34 will invalidate the bearish bias, although USDJPY primarily remains range bound.
GBPUSD Daily Analysis
GBPUSD (1.2243): GBPUSD has been gradually inching lower following the doji reversal two days ago. The British pound could be seen dipping lower towards the support at 1.2200 which marks the retest of the breakout from the trend line. The Stochastics oscillator is also seen completing its correction following the hidden bearish divergence. Thus, if support at 1.2200 is established, GBPUSD could be looking to the upside, targeting 1.2400. The bullish bias could be invalidated if price breaks down below 1.2200 in which case, the price could be seen testing the previous lows at 1.2123 with further downside in sight.
