After yesterday's surge in the markets, majors were able to close above higher levels with the Euro ending the day above 1.50 and the pound above 1.66. However, will they be able to maintain these levels during today's trading or will the excessive rally and set of fundamentals have a different thing to say?

After reaching the 1.50 mark for the first time since August 2008, momentum indicators on all time frames have either entered an overbought area or have already started adjusting to the downside. On an intraday basis, we see the euro versus dollar pair may correct to the downside as we see the formation of a shooting star candlestick accompanied by a bearish crossover on the stochastic indicator. The pair may decline to 1.4960 initially and perhaps extend towards 1.4920 yet trading above 1.5050 could open the way for further inclines towards 1.51 and 1.5260 respectively.

The Cable is currently trading around the 1.66 level after the release of the BoE minutes yesterday showed the possibility of rate hikes according to Governor King. Today we await the release of the retail sales data in the United Kingdom which suggest the sales have inclined in September which may support the pair. However looking at the charts, we see the cable has started to lose heat as trading during the Asian session was rather thin and as technical indicators suggest a possible downside correction. The correction may take the pair 1.6490 and 1.6440 only if 1.6560 – 1.6580 was successfully breached.

As for the USD/JPY pair the pair was able to near our initial target at 91.30 which represents the 55 MA on the daily charts where we believe the pair is to correct to the downside to relieve momentum indicators before rebounding back to the upside to complete the technical targets for the head and shoulders bottom pattern at 91.70 and 92.50 respectively.