Euro Cross Pick 05.11.2011
I stayed out of the EUR/GBP ahead of the Bank of England quarterly inflation report, and will continue to sit on the sidelines as the pair fails to hold support around 38.2% Fibonacci retracement from the 2008 high to the 2010 low around 0.8730-50. As the BoE adopts a hawkish tone for monetary policy, the rebound in interest rate expectations are likely to push the exchange rate lower, and the euro-pound may retrace the advance from back in March as European Central Bank President Jean-Claude Trichet softens his hawkish outlook for inflation. However, as the relative strength index approaches oversold territory, the EUR/GBP may find near-term support around former resistance around 0.8650, and I will continue to keep a close eye on this pair as it breaks out of the upward trend from back in February.
In regards to the EUR/CAD, the exchange rate has certainly fallen back towards the 23.6% Fib from 2008 high to the 2010 low around 1.3640-50, and I will play the broad range as long as the pair closes above here. I will look to test the waters later today and take a small long position at market with a stop at 1.3587, the 100-Day SMA, while leaving an open target for now.
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