The trading week in Wall Street closed with a powerful momentum on Friday, as indices added 2%. The US stock markets are in the middle of the results season and important companies such as Apple, Google, Microsoft, Citi and Bank of America have already released their reports. This period tends to be extremely volatile and it reflects on the mix performance of main indices. S&P 500 and Dow Jones added 1-1.4%, but NASDAQ lost over 1%. However, if the stock market keeps its current momentum, October will end as one of the greatest month Wall Street have seen for years.
On the technical analysis aspect, a strong trading signal came from the S&P 500 that broke through the important resistance at 1230 points. This break-up pattern was very accurate, but you have to be careful since markets tend to "shake-out" amateur traders from such "perfect" patterns. Either way, if the large blend continues rising, it will face the resistance at 1260 & 1300 points.
Important news: The European bailout plan still attracts most of the attentions, but leaders still have not agreed about the working plan and that damaged the efficiency of the bailout plan. Likewise, the advanced GDP will be published in the US on Thursday. Interest rates will be announced in Canada, New Zealand during the second part of the week.
EUR/USD
The strengthening of the EUR in the last few weeks was not caused by a significant change in the European economy. In fact, it looks like the leaders are just wasting their time instead of facing the reality- Greece is about to erase billions of dollars. In a matter of fact, Greece will not be able to return its debts and now we just need to wait until the European banks will declare these great loses in their balance sheets. This will probably cause additional credit downgrades and spread panic among the financial market. Nevertheless, until that happens the EUR will enjoy the support of Wall Street, since the risings there are helping it. In other words, the recent bullish session of the EUR was caused by the US stock markets and not by the Euro's supporters. It will be interesting to see how the financial markets will act when the results season is over.
In the technical analysis aspect, the pair moves in a clear technical pattern and the current resistance is at 1.39-1.393. The inverted "Head & Shoulders" pattern appears under this resistance, after the right shoulder was completed on Friday. The recent low at 1.365 is an important support for the current bullish session.
GBP/USD
The British pound continues its impressive recovery of the recent weeks, which is also supported by the US stock market that weakened the US dollar against the GBP as well. The pair broke on Friday through the strong resistances at 1.585 and 1.59 and it is now moving towards the 200 SMA at 1.61-1.612. The daily chart is showing the bullish pattern of "higher-lows" that started on the end of the previous month. However, the pound is might be overbought and that increases the chances for correction. Therefore, one has to be careful of going in the market on extreme levels, and look for wiser points when corrections end.
USD/JPY
The Japanese currency keeps playing with the traders. Last week, the pair broke through the upper boundary of the channel at 77, but got back to that same channel (76.5-77) on the day after. On Friday it broke the channel again, buy this time it broke down the lower boundary at 76. However, many USD buyers were waiting around that level and the pair eventually closed above 76. This sharp break-down might be just automatic orders that were triggered at the same time, and not a real beginning of a bearish session. Therefore, the pair might get back to the channel above and continue stamping. However, If the JPY continues strengthening and the pair slides under 75.9, there will be better chances for a significant downtrend.
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