Forex News: Yesterday’s trading session belonged to the bears, on the back of increasing demand for US Dollars and anxiety coming from the German political scene. Key support was broken and the pair reached its lowest point in 5 weeks.
After a very small bounce at 1.1840 support, the pair broke the level and moved lower, approaching the minor support around 1.1775. This is not a key level but combined with the oversold position of the Relative Strength Index and the Stochastic, it might trigger a bounce higher. It must be noted that yesterday’s move established the first lower low after a long while and this is a sign that the long term uptrend (seen on Daily charts) has weakened. After a potential retracement north, the pair will be likely headed towards 1.1700 zone.
At 12:30 pm GMT the US Durable Goods Orders come out, showing changes in the total value of orders for goods with a life expectancy of at least 3 years. Higher values suggest increased economic activity (producers will increase activity to fill the orders) and usually strengthen the US Dollar but to a limited extent (medium impact). The forecast is a change of 1.1% from the previous -6.8%.
US Dollar strength was seen against the Sterling as well yesterday and the pair broke the important level at 1.3450, as well as the 50 period Exponential Moving Average, setting the stage for a stronger move south.
After a small bounce, the pair moved out of the horizontal channel, breaking the confluence zone represented by 1.3450 support and the 50 EMA. This shows that the US Dollar is gaining momentum and makes the short term bias bearish. The pair seems headed towards the next target, located at 1.1330 but it is clear that price is in an uptrend from a longer term perspective so most likely we will see moves to the upside in the future. A quick move above 1.3450 and the 50 EMA would suggest that the initial break of support was fake and would invalidate the bearish scenario.
The United Kingdom didn’t schedule important news releases for today, so the pair’s direction will be decided by the technical aspect and the U.S. economic data.