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Forex Majors Technical Analysis in October

October 13, 2017

In the month of October a lot of attention will be focused on Europe for political reasons as well as for economic reasons.

The independent declaration of Catalonia could create confusion in a market that was only ready to wait for the data coming from the ECB meeting of October 26th. The political uncertainty in Britain is another element to be taken into account. Let's look at the forecasts for the main exchange rates in October.


There is really little doubt that in the next few months the game will be played between 1.17 and 1.20. At this point buyers and sellers will collide decisively, probably until the ECB meeting. We were able to test how on several occasions the 1.20 psychological resistance threshold was able to hold the bullish attempts of EurUsd.

The prompt market correction has made it clear that the market is not yet ready to see further weakness in the Dollar and perhaps Yellen, announcing a rise in rates likely to be in December, charted the classic sand line for EurUsd at 1.20 for a few months. The question of Catalan independence stays in the game, and it could affect ECB decisions in the October 26th meeting delaying the tapering. The widening of the spread between Spain and Germany is in fact an element of instability that could theoretically be added to the 2018 Italian election event. In operational terms, the breakthrough of the 1.1660 / 1.17 supports would produce an immediate acceleration down to 1.14. Upward, the overcoming of the 20-day mobile average at 1.1820 will bring 1.20 under pressure.



The rise of UsdJpy keeps on pressing the resistance of area 112.70/ 113. This is not surprising, too, because a number of dynamic resistances passes through these parts. Rising up over this threshold and then over 115 would probably also release the long-term interest rates to which UsdJpy is closely related. Our view is, however, concerning a downward phase toward 110 before a new assault to the resistance.



The resistance of 1.35 was the point beyond which for British citizens the doors would be opened for a much stronger strengthening of the Pound. Nothing to do with the market that for three consecutive weeks has shaken the Cable back. Brexit is still leading, but also the possibility of raising rates coming from the Bank of England after the arrival of inflation in London is getting a lot of attention. On the opposite side, 1.30 will be the support that GbpUsd will have to maintain. A loss of this level would coincide with a rather chaotic phase even for the English politics.



The two bullish legs that began in 2016 were exactly equal to 0.81, a point where AudUsd stopped his run. Was it really a double top? Well, it may be, but in order to formalize the trend reversal, a breakthrough of 0.78 is necessary. At that point, the return to 0.76 (and the fall of commodities) will inevitably occur with a concomitant test of the upward trend line in place since 2016. A real test for a currency that is heavily influenced by the rising of US rates getting closer and closer to the official Australian rate of 1.50%.


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