Deep Overbought Levels Call for Pullbacks
Forex News: The Euro and the US Dollar both benefited from better than expected data yesterday and this created a slower session, with price oscillating in a 50 pip range.Technical Outlook
Yesterday’s price action created a minor resistance at 1.1435 but also established 1.1400 as support. A break of either one of these levels will probably trigger additional movement in that direction but the pair is in a strong uptrend, so a break of support will not extend very low. To the upside the next resistance and target is located around 1.1450. Our overall bias remains bullish but the RSI is extremely overbought and this calls for a retracement.Fundamental Outlook
Today at 9:00 am GMT we take a look at Eurozone inflation with the release of the European CPI Flash Estimate. The report uses data from 13 member states that report CPIs earlier and tends to have a significant impact on the Euro. The forecast is a change of 1.2% (previous 1.4%) and under normal circumstances, higher numbers strengthen the currency.
At 1:45 pm GMT the Chicago PMI comes out, showing the opinions of about 200 purchasing managers from the Chicago area regarding overall business conditions. The impact is medium but numbers above the forecast 58.1 show optimism and usually strengthen the greenback.
The Pound continued to strengthen and the US Dollar to weaken so yesterday the pair continued on an upwards path, reaching the key resistance at 1.3000.Technical Outlook
The current level is very important from a technical perspective (previous resistance) as well as psychological perspective (big, round number) and the Relative Strength Index is deep in overbought territory. All these factors make us anticipate a retracement lower during today’s session but keep in mind that the pair still has bullish momentum so a break of resistance is not out of the question.Fundamental Outlook
The British Current Account is today’s main highlight for the Pound. The indicator shows the difference in value between imports and exports and strengthens the currency if it posts a higher than expected reading. The time of release is 8:30 am GMT and today’s forecast is 17.2 Billion, while the previous was 12.1 Billion.