EUR/USD
The Euro initially fell during trading on Wednesday but has seen a bit of support underneath the 1.14 level, to turn around and show signs of life again. The market has been forming a “rounded bottom”, which is a very slow bullish accumulation pattern. I think at this point it makes sense that we will eventually go higher, mainly because of the Federal Reserve being a bit more dovish than originally thought. The recent pullback has been more technical in nature than anything else as the 200 day EMA of course caused the lot of systems traders to get short. That being said, I do believe that this pair will eventually break above the 200 day EMA and continue to go much higher, perhaps reaching towards 1.18 level. However, it’s going take a lot to get above there and I think we will continue to see sloppy and obnoxious high-frequency trading.
GBP/USD
Traders around the world are starting to voice their opinion that the Brexit will be postponed, and therefore are setting themselves up for a rally. Unfortunately, if things don’t work out that way we will see an absolute melt down. In the short term, it’s obvious that people are willing to jump in and pick up bits of value as they appear on pullbacks, and I believe that the 1.27 level should now be thought of as significant support. If that is going to be the case, then I think we will probably see quite a bit of buying pressure and perhaps an attempt to break above the 200 day EMA. If we get that, expect the market to really take off once we get above there. Otherwise, expect a lot of sloppy and back and forth trading between here and the 1.27 handle.
