Weekly Forex Outlook for 10/10-10/15

Technical:

The Eur/Usd pair closed Friday at 1.39354.  It opened Sunday at 1.39939 (a 58 pip increase).  The daily and four hour charts are showing that the Euro is quite overbought, which if is the case, would mean that a correction or consolidation is in order. The Euro daily chart is also showing two Doji Candle sticks (10/7 & 10/8).  Doji candles seen after a run up or run down, usually mean indecision or even a chance of short term reversal.  I would definitely feel comfortable entering a short position if the candle following the two Dojis is a bearish candle.

Regardless the overbought position and the two daily Doji candle sticks, it is still a fact that the Euro has gone 22 consecutive days without closing below a low of the previous day. 1.400 is actually a psychological barrier that the pair has moved up past but then quickly retraced below it .  If a retracement is in order, I would expect the pair to drop to the 1.3680 area which is the 23.6% fibo retracement from the beginning of the September uptrend. If it breaks below 1.3680 and has a daily close below that level, I would expect it to drop to it's 50% fibo retracement of 1.333.  After retracing, it should continue its upward trend to 78.6% fibonacci retracement from the 12/2009 high of 1.5143.  The 78.6% upward retracement would be in the area of 1.442.

My 50 day SMA has crossed up above my 200 SMA which could be an indicator that there will be a little more of a move up, maybe to 1.4065 before it consolidates.  The crossover in my opinion isn't enough to justify an up movement though.  

Fundamental:

This week we will have corporate earnings, the FOMC meeting (Tuesday), a report from chairman Bernanke, PPI, Unemployment claims, Retail Sales, and Consumer Sentiment, to name a few.  Forex Calendar 


Also, with the dismal results the Unemployment Claims Report released on Friday, it is expected that there should be further announcement of aid from the Fed, which would have a negative affect on the dollar.  Most likely, the Fed would buy back bonds:  The intention would be to lower interest rates.  By lowering interest rates, this would hopefully free up available credit to consumers and businesses, allowing them to spend more money.  This most likely would be good news for the stock market.  However, by purchasing bonds, this would put more money into the economy/market, which would devalue the strength of the dollar, most likely having a negative affect on it.