Daily Forex Market Preview, 25/02/2016

The markets remain volatile with both the dollar stronger against the Euro and weaker against the Yen. However, USDJPY has made a doji pattern near the 112 support which will be key for further direction. Meanwhile, Eurozone inflation data is due to be released in the European session today. The British Pound has seen another sell-off yesterday and the GBP awaits the second estimate revision to the Q4 GDP numbers.

EUR/USD Daily Analysis

EUR/USD (1.10): EUR/USD has closed in a doji pattern yesterday and a close to the upside above the highs of 1.1046 could signal a potential pullback to the recent declines. EUR/USD will be at risk to the Eurozone CPI data due later today. However on the H1 chart, there is an inverse head and shoulders pattern which points to a minimum correction to 1.11. Following prices closing above 1.10 handle, we expect an eventual test to 1.113 – 1.1105 broken support to establish resistance for a decline back to 1.095 – 1.093. On the 4-hour chart, however, the Stochastics is posting a hidden bearish divergence and, therefore, the upside moves are likely to be limited.

USD/JPY Daily Analysis

USD/JPY (112.2): USD/JPY tested the lows below 112 but managed to close in a doji candlestick pattern above 112 support. The daily Stochastics has printed a higher low indicating a possible move to the upside. Watch for a sustained move to the upside for a test of 116.21 resistance initially. From the 4-hour chart, there is scope for a dip back to 111.31 region. As long as prices remain supported above 111.31, a break above 113 could trigger a test to 117.

GBP/USD Daily Analysis

GBP/USD (1.392): GBP/USD continued with another day of strong declines breaking below 1.40 handle yesterday to test the lows near 1.39 before pulling back. Following the break below the lower trendline, a test to 1.40 could potentially see renewed declines start in GBP/USD. However, if prices manage to close above 1.40, there could be a possible correction. The Stochastics remain in oversold levels at the moment and a bearish signal below 20 could see further selling pressure evolve.