Euro And Pound Neatly Rejected Overhead Resistance Overnight
Axi | Mar 21, 2017 10:21
Originally published by AxiTrader
While the US dollar lost a little ground against the Aussie, kiwi, Korean won, Singapore dollar, Mexican peso, Brazilian real and many other pairs in the past 24 hours both the euro and British pound have underperformed.
In the case of the pound that's pretty easy to explain given the announcement of date when the much anticipated triggering of Article 50 to begin Brexit will be next Wednesday the 29th of March.
This trigger to many signals the start of a process which will undermine the UK economy and thus also the pound. It's down about 0.35% against the US dollar at 1.2354. But that's well below the high of the past 24 hours at 1.2435.
The euro has done a little better - it's actually flat for the day at 1.0738 - but again that is below the high of the day at 1.0777. Perhaps with the French presidential debate on Monday night, and with French-German bonds spreads continuing to widen traders are a little cautious right now.
Equally though both the euro and British pound rejected overhead resistance on the charts last night.
h2 EURO/h2As I wrote yesterday the euro needs to break 1.0800/10 to kick higher. That's a level, a little above, the trendline resistance that comes in around 1.0795 and stretches back to the November 2016 and January 2017 highs.
That the euro didn't get that high doesn't negate it's importance. Nor does it negate the chance of a test.
But a break is needed if the euro is to head toward the 1.10 region I'm targeting in the medium term.
On the downside euro has support short term in the 1.0690/1.0700 region. A break of this level could signal a deeper retracement toward 1.0620/40.
h2 BRITISH POUND/h2The pound's high and rejection of the overhead resistance was right on the downtrend line from the January high. As the chart below shows there is further resistance at 1.2480/90 which stretches back to last August's high.
But for the moment the pound has reversed off resistance and a move back toward 1.2285/1.2300 wouldn't surprise. That's the 38.2% retracement of recent move higher and my slow moving average on the 4-hour charts.
Further support is at 1.2260 short term.
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In many ways though while the euro and pound have their own issues it is difficult to be too bearish either of them at present while the US dollar's rally continues to stall.
While the US dollar continues to lose ground against the commodity bloc, emerging market, and other currencies the chance remains that a break to the topside for this unloved pair could still happen.
But, as I always write, the McKenna Mantra is to respect these trendlines unless or until they break.
Have a great day's trading.
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