EUR/USD
The euro rallied initially on Monday, but then rolled over and fell through the 1.20 level. By doing so, we are now seeing divergence on the MACD against price action. This suggests to me that this correction could continue a bit, and I think that the relief rally in the US dollar has a little bit of way to go. The hurricanes did not cause major issues over the weekend, and I think there will be a little bit of positivity coming out of America because of this. Nonetheless, the longer-term trend is to the upside and I think that this pullback will end up being a buying opportunity in a few sessions. I expect the 1.1750 level to be supportive, and most certainly the 1.15 level after that. If we did break above the top of the shooting star from the session on Friday, that’s a very bullish sign and has this market looking for the 1.25 handle.
GBP/USD
The British pound struggled as well, initially tried to rally but in the end forming a shooting star. The British pound has a lot of issues when it comes to the future, as there are too many unknowns. I believe that most of the rally in this market probably had more to do with US dollar weakness than British pound strength. Because of this, I believe that a pullback to the 1.30 level makes a lot of sense. I don’t know if we break down below there, but certainly at this point we seem to be a bit exhausted. The 1.3250 level above continues to be massive resistance, and I think it’s going to take several times to break above there, and this overextended move that we have done so far, this month certainly won’t be the answer.
