There is no longer any doubt. The eight-month uptrend in EUR/USD is over. The chart is broken.

The only question now is: how far will the euro fall?

What we see on the daily chart is that the euro had a strong, steady uptrend that was broken in early December and has been sliding since. Thursday showed a big drop but Friday showed some stabilization, generating a doji star formation that can sometimes indicate a reversal.

When we look at some associated indicators, they show that the euro is severely oversold. The daily Bollinger Bands (in blue and green) show the euro driving down the lower Bollinger. The slow stochasic (red and orange) is deeply in oversold and the RSI has broken down.

All these indicators tell us that there will be a rebound in the euro at some point but our experience also tells us that markets can remain oversold for long stretches at turning points in a market.

The target we have been eyeing through this entire trade is the 200-day moving average (red). It comes in at 1.4187 today, which is nearlywhere the lows from August and the psychological support at 1.42 comes in.

It will be very tempting to go long EUR/USD in the next day if we see these levels. In a deeply oversold market, such convergence of support is generally a great place to put orders and hope they get filled on a sharp drop in the market. If those support levels give way, we wouldn’t rule out a drop to 1.39 in the near term.

Confirmation of the rebound will be found on the hourly chart, where we can see a well-definted downtrend.

We can see that this trend has been tested at least 4 times. It should pose initial resistance to any rebound in this pair. If it’s breached in the near-term, expect the 38.2% Fibonacci retracement level at just below 1.46 to be the next target. Those looking to sell a rebound in EUR/USD will start piling in at that level.

Overall, this is an exciting chart that will continue to add volatility and intrigue to the forex market in the coming weeks. The euro is definitely in a severe retracement following the past 6 months of gains but it’s growing oversold and market participants need to be prepared for a bounce.

It’s such an interesting time in the foreign exchange market. We are seeing huge moves every day in each cross. Making the right trade can be extremely profitable, with 100-200 pip moves everywhere you look.

The place we’re looking today is EUR/USD because we are seeing powerful signals and a potentially sharp move higher or lower.

Let’s take a look at the hourly chart.

It was has been two great days for technicians in EUR/USD trading. After the break below 1.50 we have been looking for a test of the major trendline support that stretches from the March lows (the green line shown).

Yesterday, we got it. And as expected, the trendline didn’t give up easily. Instead, we saw a powerful bounce that looks like a massive reversal on the daily charts.

If this is the case, we can see a quick move back to the 150.50 highs. If we can get a daily close above 1.5050, look for a strong extension high, perhaps as high as the all-time high of 1.60-1.61.

Still, it’s hard to be convinced just yet. The hourly action since the break of 1.4858 hasn’t been as agressive as we hoped.

The pair has also stuggled to get over 1.4668, which is the 61.8% Fibonacci retracement of the downmove from the Oct. 25 high.

 Instead, we’re seeing consolidation right around those key levels. Moreover, the spike to 1.49 came immediately after the FOMC statement, which is a time where the market is prone to false signals.

Our favourite thing about this chart is that something has to give. Either we’re going to make a new high above 1.5050 or we’re going to break below the daily trendline stretching back to March. Either way, there is going to be lots of pips to be made for the rest of the week and into next week.

The pound sterling was surprisingly resilient during Wednesday’s bought of risk aversion and now that the tables have turned, we have seen a remarkable run-up in the pair. Since bottoming 10 hours ago, it has shot up to 151.50 from 148.50 – a 300 pip move. About two-thirds of that came in the past two hours after the U.S. GDP report showed growth at 3.5% compared to the 3.2% expected. There is also talk of Middle Eastern buying.

The GBP crosses have all traced out more bullish technical patterns than the rest of the market, which is consolidating. On the hourly chart, we see that GBP/JPY has cracked resistance from the double top on Monday and Tuesday.

GBY/JPY hourly oct 28

We would caution that an overshoots happen and we would want to see an hourly close above 151.20 before we would be jumping in. If it does, there is no resistance all the way up to 153. On a failure, look for a quick pullback to 150 or 150.20.

Also be aware that the hourly Bollinger is far into overbought territory so bulls looking to get in will eventually get a chance.

Much of the volatility in GBP relates to uncertainly about what the Bank of England will do when policymakers meet next week. A Reuters poll of 62 economists shows 19 do not look for an further quantitative easing, 22 for an additional 25 billion pounds and 21 for an additional 50 billion pounds. The more easy money, the worse it will be for the sterling.

The Bank of England decision is Thursday, Nov. 5 at 5 a.m.

USD/CAD Hourly oct 28

USD/CAD has gained more than 200 pips in the last day. The pair got a surge of momentum as it burst into the Aug-Oct range of 1.06-1.11 but stalled at the downtrend resistance (green line) that began at 1.30. After breaking that resistance, it retested it several times before surging 125 pips overnight. The pair is now benefitting from the support of the downtrend (resistance becomes support).

The pair has had a nice run since falling to a 14-month low of 1.0260 but with all major resistance until 1.11 broken, the pair could continue to run. The hourly Bollinger Bands (show) are stretched but could continue to widen before we see a period of consolidation.