After a rather volatile week, traders are likely to take the much needed break as the weekend approaches. Following the initial risk off sentiment, the markets rallied including the US dollar which posted strong gains. However, the risk of profit taking could see a short-term correction in the markets. Trading is expected to be thin with the US and Canadian markets are closed today. The economic calendar is also quiet with only FOMC’s Fischer and BoC’s Poloz due to speak later today.
EUR/GBP Daily Analysis
EUR/GBP (0.8681):The declines in EUR/GBP has sent price testing a two-month low near the support level of 0.8687 - 0.8586 region. The daily timeframe Stochastics has moved into the oversold level as price trades in the support level indicating a near-term bounce to the upside. Resistance is seen near 0.8888 which is likely to be challenged in the near term. On the 4-hour time frame, price action is seen forming an inside bar at the current level and validates the upside bias on a breakout above 0.86870 price level.
GBP/JPY Intra-dayAnalysis
GBP/JPY (133.82): GBP/JPY is seen trading near a two-month high, but the upside momentum is starting to show signs of exhaustion above 134.00. On the hourly chart, the Stochastics oscillator shows a potential bearish divergence that is forming, validated by the divergence in the highs and a breakout from the rising median line. As long as price does not post a new high, a breakdown below 133.350 could trigger the risk to the downside as GBP/JPY is likely to dip back to 131.660 where support is seen to be forming.
USD/CAD Daily Analysis
USD/CAD (1.3465): USD/CAD has been rising steadily with theprice at an 8-month high near 1.34463. Since mid-September, the price action in USD/CAD has been forming within a rising wedge pattern with the most recent daily sessions being rejected strongly above 1.3463. Short term resistance at 1.3414 has been broken, but with the current exhaustion in price, a breakdown below 1.3414 could trigger a near-term correction down to 1.3221. This view is also validated by the bearish divergence on the daily session's Stochastics oscillator signaling that USD/CAD's gains are capped for the moment.