EUR/USD
The EUR/USD pair broke out to the upside, slicing through the 1.17 level. That was previously a neckline for the head and shoulders pattern that has been on my mind for some time, now that we have broken down below there, I expected the market to drift down to the 50% Fibonacci retracement level, which is the 1.13 level. However, now that we have broken back above the 1.17 level, it negates the pattern, and I believe that the buyers are starting to take control again. A lot of the US dollar weakness comes down to Congress not been able to do tax reform, so with that, I believe that this market will go looking towards the 1.20 level above, and then eventually the 1.21 level after that. A break above there should send this market much higher, perhaps to the 1.25 handle.
GBP/USD
The British pound fell initially during the day on Tuesday but turned around to bounce and form a bit of a hammer. We are still stuck in consolidation, and I think that is going to continue to be the way forward in this market as the 1.30 level underneath is the “floor” in the overall consolidation, and I believe that the uptrend line will also continue to offer support. The 1.3333 level above being broken to the upside would be a very strong sign, and send this market towards the 1.35 handle, and then eventually the 1.3650 level after that.
A break above that level is a very bullish sign in ins the downtrend as far as I can see longer term. However, I think we have a lot of work to do before we can get above there. In the meantime, it’s likely that the market will bang around in this general vicinity, so I think short-term range bound trading is probably going to continue to be what we see.
