EUR/USD
The EUR fell significantly against the US dollar during the day on Friday, as it looks likely that we are going to go reaching towards the 1.17 level underneath. That area has caused a significant amount of support, and now I’m starting to wonder whether we are not forming some type of head and shoulders. If that’s the case, the pattern would signify that we could perhaps drop as low as 1.13 underneath, and this makes sense if Donald Trump does in fact nominate a hawkish Federal Reserve Chairman. Right now, that seems to be what is driving the market more than anything else, and I think that a breakdown below the neckline at 1.17 would be a nice selling opportunity. Alternately, if we bounce from there we should then consolidate back towards the 1.1850 level. Longer-term, there still is a signal to go to the 1.25 handle, but that doesn’t mean we can’t break down between now and then.
GBP/USD
On a day that the US dollar rallied against almost everything on the planet, the British pound menus to form a nice-looking hammer at the 50-day exponential moving average. That’s quite impressive, and I think that the British pound is about to get a bit of a boost. A break above the top of the hammer for the day, I think we will test the 1.3250 level, the 1.33 level, and then eventually the 1.35 handle. That’s not to say that this is can be an easy move, but I do think that the buyers are going to try to make some type of stand here. I also recognize that the 1.30 level underneath should be a “floor” in the market. Either way, I expect volatility, but I am favoring the upside currently.
