2013.01.11: “We have signs that fragmentation is being gradually repaired” – Mario Draghi, ECB President
EUR/USD
The statement above and other positive comments made by the European Central Bank President, Mario Draghi launched the pair into higher territory and resulted in a decisive break of both 1.3090 and 1.3170 resistance levels, exposing the strong resistance located at 1.3290. Yesterday’s technical outlook proved to be wrong, and the recent move confirms once more the fact that important fundamental events can overthrow any technical aspects.
Technical Outlook
After such a powerful move up, we consider that the bulls are in complete control of the market and they will push price even higher after a retracement. The Relative Strength Index is in extreme overbought territory at the moment so a retracement is likely to occur, generated also by some profit taking and closure of existing positions. After that potential retracement, price is likely to touch or even break the important resistance at 1.3290.
Fundamental Outlook
The Euro zone doesn’t announce any high impact indicators today but the momentum created by Draghi’s hawkish comments is likely to drive the pair higher. The United States release their Trade Balance at 1:30 pm GMT (the difference between exports and imports) and if the value is higher than the anticipated -41.1B (previous was -42.2B), we could experience some US Dollar strength.
GBP/USD
The pair was affected by Mario Draghi’s comments but not to the same extent as the EUR/USD was. However, the bulls controlled the market throughout the whole day and the US Dollar had little strength against the Pound sterling.
Technical Outlook
We expect the pair to break the resistance created at 1.6130 and head into the next level of resistance located at 1.6200. This period is characterized by high positive correlation between the two pairs and since the US Dollar is weak, the resistance levels lose strength. The Relative Strength Index is showing an overbought condition so we anticipate a small retracement before the pair can move higher.
Fundamental Outlook
The most important economic indicator that will affect the British Pound directly today is the Manufacturing Production released at 09:30 am GMT. An increase is anticipated, from the previous of – 1.3% to 0.6%. Higher values than expected usually strengthen the Pound and could drive the pair higher. The US Trade Balance that we mentioned earlier is likely to affect the GBP/USD pair as well.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 4 year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view on the market.