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EUR/USD: Bullish Breakout, What’s Next?

EUR/USD: Bullish Breakout, What’s Next?

They still exist, the huge price breakouts in spite of low volatility amidst a low-liquidity market environment. While we have almost forgotten how sustained breakouts look like, yesterday’s huge price movements reminded us that everything is possible, regardless of the market’s current bias. The FX market seemed to be recovering somewhat from the summer doldrums with the euro enjoying its strongest daily advance in more than a year. While the EUR/USD was the best performing currency pair Tuesday, the GBP/USD rose in tandem with the bullish price development and broke above 1.28.

The euro’s rise started after European Central Bank President Mario Draghi offered upbeat remarks on monetary policy, suggesting that the ECB could soon move away from their accommodative policy. Draghi’s message was interpreted as a beginning to implement the ECB’s exit strategy.

In addition, the U.S. dollar weakened sharply against its major peers after the International Monetary Fund (IMF) cut its outlook for the U.S. economy because of policy uncertainty. The IMF cut its 2017 growth forecast to 2.1 percent from 2.3 percent while the 2018 outlook was cut to 2.1 from the previous 2.5 percent projection. Fed chair Janet Yellen added fuel to the fire by suggesting U.S. asset valuations were ‘somewhat rich’. Consequently, the greenback suffered further losses and sent its counterparts higher in return.

Now, let’s take a look at the technical picture in order to assess the likelihood of further upward momentum.

EUR/USD The pair broke above the upper barrier of its recent sideways trend channel and while there is a risk of imminent pullbacks towards 1.13, we generally expect further gains towards 1.1450 and 1.1530. The primary uptrend is still intact and with the euro remaining above 1.13 we see chances of a rise towards 1.1530, the upper barrier of the current bullish trend channel. On the downside, we expect a current support to be at 1.12, provided that the euro falls back below 1.1280.

EUR/USD Daily Chart

GBP/USD The cable passed the 1.28-barrier and consolidated around that threshold. If the pound climbs above 1.2830 we anticipate further bullish momentum towards 1.29 – a crucial resistance level in the GBP/USD. However, if sterling is unable to hold above 1.28 it could fall back towards 1.2750 in a first step. A lower support is still intact at 1.27.

GBP/USD Hourly Chart

Here are our daily signal alerts:

EUR/USD Long at 1.1375 SL 25 TP 20, 60 Short at 1.1335 SL 25 TP 20, 40 GBP/USD Long at 1.2830 SL 25 TP 20, 60 Short at 1.2690 SL 25 TP 30-40

We wish you good trades and many pips! Disclaimer: Any and all liability of the author is excluded.

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