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Majors Technical Analysis – December 2017

December 07, 2017

The usual analysis of the beginning of the month starts with the main exchange rates in a very interesting month for many reasons.

The seasonal situation, the liquidity (which comes to be lower during the Christmas period and at the end of the year)) and the appointment with central banks. As seen last week, the mid-month meetings of the Fed and the Bce (on December 13th and 14th) could make the difference in the balance of EurUsd. Obviously also the geopolitical tensions with North Korea could weigh on the market that always looks with a mixture of diffidence and euphoria to the extraordinary performances of the Bitcoin crypto currency.

Let's go now into details for the main exchange rates.



Two weeks ago, EurUsd surpassed the right shoulder of the head and shoulder figure that has been formalized by the market since August. That resistance of 1.1880 was exceeded for a couple of days with an excursion above 1.19 before bending again under the previous resistance. Was it a false signal? We do not exclude it also because the same trap, not for bulls but for bears, started at the end of October when EurUsd dropped below the neckline of 1.1680 for some sessions.

Therefore, the formulation of directional ideas in the trading range scenario is not possible at the moment. For what concern us, the target of 1.14 is still open within the next three months, a technical threshold where we also could find the 38.2% of retracement of the whole rise started in January 2017.



There has been an evolution during the last few weeks in the background of the Pound. The Bank of England has raised interest rates and the British government seems to have surrendered to the idea of ​​paying an account between 40 and 60 billion euros to the European Union as a compensation for the Brexit. The removal of these uncertainty elements (mostly the second one) has helped the Pound to go from 0.90 to 0.875 versus the Euro.

Few doubts about the fact that 0.8750 is the technical watershed. The fall down to this level should generate an increase in long positions in the Pound with the direction to be drawn towards the support zone of 0.83.



UsdJpy feels the previous resistance dictated by the bearish trend line and is now rebounding trying to come back into the bearish channel. We will soon get to know if this reaction will allow the Dollar to restart its upward trend but it is not excluded that this movement already represents the initial part of wave 5 which could bring the exchange rate back to the top of 118.70 reached in December 2016. Vice versa, the return below 110.85 would fuel a downward trend towards 107 at the end of 2017 and in the first few months of  2018.



A delicate moment for AudUsd as the supports of area 0.75 are under pressure. The divergence that has been created in recent times compared to commodities is increasingly evident and this leaves us perplexed about who, between commodities and Aussie, is not telling the truth. The exchange rate since the beginning of September has only fallen downward and now it is undermining the trend line that drives the rise since January 2016. A downward  breakthrough could represent a negative event not only for the Aussie  (that would fall down to 0.72) but also for commodities.

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