EUR/USD
The Euro initially fell during trading again on Friday but found enough support to turn things around and form a hammer. However, I’m not overly excited because a lot of this could’ve simply been short covering ahead of the weekend. I also recognize that there is an area near the 1.1450 level that extends to the 1.15 level that should offer significant resistance. I think that we will probably reach towards that level, all things being equal, and then see sellers jump back into the market. If we do break above the 1.15 level on a daily close, that might put more confidence back into the marketplace. I think that the 1.13 level underneath will continue to offer support, but if it gives way it could open up the door for another 100 point drop.
GBP/USD
The British pound also fell hard, but interestingly enough we have turned around of form a hammer in one of the most hated currencies. We are testing the previous downtrend line that we have broken out of, and quite often we will see this is a pattern that leads to a complete trend reversal. Obviously we need some type of catalyst to send the British pound higher, and quite frankly right now we don’t have it. Technically speaking though, at the very least you can say that the British pound is oversold, and that a bounce is necessary. If we were to turn around and break down below the 1.2750 level, then I think the market could unwind rather drastically. A bounce from here could see the market go as high as 1.30, or perhaps even higher than that. Trend changes, which this very well could be in the midst of, tend to be very noisy affairs.
