EUR/USD: Tentative Recovery
The EUR/USD pair failed to follow-through after the bearish break below the July '12 trend-line. It has started to rebound, forming an inverted head and shoulders pattern with a neckline at 1.2930; a decisive break above which could lead to a rally up to 1.3070 eventually, although strong resistance at 1.2980, composed of the 50 and 200-day MA could slow progress on the way up. Given the overall bearish tenor of the chart, however, and the high event risk of Bernanke's testimony today, a continuation lower is also a possibility, with a penetration of 1.2840 required for confirmation, and - in a steep down-trend - a follow-through expected down to 1.2580.
USD/JPY: Still Channeling Up
The USD/JPY pair continues to rise within its bullish channel, although at a much slower rate then previously, and it looks vulnerable to a bearish breakdown. Momentum has, however, come off over-bought highs and given the dominant up-trend the pair will probably now rally up from the lower-channel line towards the upper line and an eventual target set after the breakout from the ascending triangle at 104.00. A move below yesterday's lows, however, at 102.34 could confirm a channel breakdown to a target at 101.35. Fed Chairman Ben Bernanke's speech today will probably cause some volatility in any case.
Analysis By: Joaquin Monfort, Forex4you Analyst
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