A rather busy day in the markets for the three major economies as it is inflation day starting off with theUK and ending the day with the US. Trading today may be quite volatile due to the major market movers and we advise to monitor fundamentals closely.
The Euro versus Dollar pair has successfully breached the neckline for the head and shoulders pattern seen on the daily charts at 1.3860 (61.8% correction) where its technical targets currently reside at 1.3370. The pair is attempting to retest the broken neckline as momentum indicators near an oversold area to gather enough bearish momentum and reverse back to the downside with strength to reach the suggested targets. Despite the bullish candlestick seen on the four hour charts we still expect the pair is to trend to the downside as the Aroon down line is currently above the 70 mark whereas the Aroon up is crossing the 30 mark to the downside. Note that data from the EU and Germany are to be released at 09:00 GMT which may cause heavy fluctuations in markets.
Concerning the Cable, it continued to decline to reach an intraday low of 1.6208 up to the hour of this report as it faces difficulties to breach the lower line of the pitchfork channel. However, a breakout of this support level will take the pair to as low as 1.6180 and 1.6060 before attempting to attack the neckline for the double top formation at 1.5940 – 1.5950. We may witness a slight upside correction on the intraday basis to relieve momentum indicators on the four charts 1.6320 yet the overall trend remains to the downside as far as 1.6620 remains intact. Once again, inflation data from the Kingdom at 08:30 GMT needs to be monitored carefully as better than expected readings may result in a more aggressive correction.
As for the USD/JPY pair, the bearish candlestick reversal on the weekly charts seems to have affected the pair heavily as it has now breached the 97.10 mark to drag the pair further to currently trade at 96.60s. Technical indicators on the daily charts are still supporting the downside movements yet we may witness a slight upside correction to retest 97.10 before reversing back to the downside with targets at the 38.2% correction at 96.00.