November: Monthly Technical Analysis

Nov 05, 9:56 am
Market Weekly Recap-November 21st

EURUSD Monthly Technical Analysis

From the monthly charts, EURUSD has been forming a major long term descending triangle pattern since early 2008. The major support level for this pair comes in at 1.23 – 1.22 levels, which will be a bit a hard to break initially unless backed some strong fundamentals from the Eurozone. Needless to say, if the descending triangle pattern is validated, we could be looking at a major longer term levels of the Euro trading near parity to the US Dollar.

We do however notice that the recent break down from the rising price channel has been very quick without any major retracements. We notice the previous support/resistance level near 1.29418 as the most likely retracement for EURUSD over the months should the support level at 1.22 hold.

Monthly Technical Analysis

Fundamentally, the ECB has been a key driver for the Euro in recent months with most of the major moves coming on the back drop of ECB’s policy decisions. This month’s monetary policy from the ECB is likely to be a non-event with the Central Bank opting to stay put, at least until December to see if the Bank’s recent efforts will pay off. Inflation has been mostly ranging between 0.7% – 0.8% and unless there are serious tail risks to the Euro, the ECB is unlikely to react.

QE has also been an often talked about theme for the Euro, single currency. However given the complicated framework of the Eurozone and staunch resistance from Germany against the ECB to dip into buying sovereign bonds, it is uncertain at this point if the ECB has enough room for more easing. The Central Bank has however embarked on various schemes such as the ABS securities and purchasing corporate bonds as well the second tranche of the TLTRO, which analysts expect could see a better response from banks this time around.

Considering the above, the longer term bias for the Eurozone is slightly towards the upside, so long as 1.22 continues to support prices.

EURUSD Monthly Pivots

R3R2R1PivotS1S2S3
1.31851.30341.27811.26311.23811.22311.1979

 

GBPUSD Monthly Technical Analysis

From the monthly charts, GBPUSD eased back into the multi-year range between 1.667 and 1.519. We notice a triangle formation taking shape with the break out to the upside. Currently, GBPUSD has dropped back to the break out level of 1.60 and this is likely to be a critical level to shed more light on future price action.

To the upside, we can see that the Cable is likely to encounter resistance at 1.667 ahead of the major resistance of 1.72. A break below 1.60 could see GBPUSD test the upper trend line of the triangle pattern towards the region between 1.56 – 1.55.

Monthly Technical Analysis

Not shown in the chart is the 38.2% – 50% retracement of GBPUSD from the weekly time frame. There is no clear indication from the individual candlestick patterns yet, but the weekly charts do show some long legged dojis being formed in this region, which is indicative that the market sentiment is also quite confused as to the directionality for the Cable.

Fundamentally, the GBP weakness, especially in recent weeks has come from postponing the interest rate hike timetable. This has been on account of weaker PMI’s from the region and also the bullishness of the Greenback. With the Fed ending its QE3 purchases, the US interest rate speculation is back on the table with an expectation of a rate hike towards mid 2015. A change in the economic landscape of the Island could bring back the interest rate hike discussion back into vogue.

GBPUSD Monthly Pivots                             

R3R2R1PivotS1S2S3
1.65911.64211.62111.60411.58351.56651.546

 

 

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