EUR/USD
The EUR/USD pair continues to grind above the 1.17 level as we await words from ECB President Mario Draghi from Jackson Hole, Wyoming. Because of this, I think that the 1.17 level underneath will be considered supportive, and as you can see on the chart I have drawn a bullish flag. I believe that the market is ready to go higher if he says nothing overly dovish during the meeting. If we break out to the upside, I think that the market is ready to go looking towards the 1.20 level above. A breakdown below the bottom of the bullish flag would send this market looking for support at the 1.15 handle. Either way, hang on, it’s about to get volatile over the next couple of sessions.
GBP/USD
The British pound broke below the psychologically important 1.2850 level during the day on Tuesday, but also closed below there which of course is a very sign. I believe that the market is probably going to go looking towards the 1.2750 level after that, and therefore I think that if we can stay below the 1.2850 level, shorting is the only thing you can do. I’m not looking for some type of massive collapse, just a continuation of the bearish pressure that we have seen for so long. Ultimately, I think that there is significant support near the 1.25 handle, so I don’t know that were going to go below there, least not anytime soon. However, if Janet Yellen says the wrong words during the Jackson Hole Symposium, it could put enough bearish pressure on the US dollar to turn things around completely. Barring that, I believe that we are going to see continued selling over the next several sessions. Buying isn’t much of a thought until we clear the 1.30 level.
