The EUR/USD sell-off left behind a gap and that’s really the technical story here which I think is going to be the way to handle the avalanche of fundamentals (elections, data, elections, confusion over election results). I’m only slightly kidding.
The break lower I think was overdone perhaps, but the real weakness will be shown as the pair closes the window on the gap lower. The euro has not climbed enough to reach 1.3088 and I should mention that the U.S. Dollar Index has yet to close the gap higher on its chart.
The EUR/USD breakdown was likely over-exaggerated on the elections but I think the move lower is still the path of least resistance. The move to the upside must be tempered with the likelihood that selling pressure is waiting between 1.3080 and 1.3100.
The U.S. Dollar Index has moved lower but has yet to reach the 79.58 gap close.
And while the Dow Jones (YM contract) did close the gap, it has yet to accelerate far from the area.
The daily YM has retraced to the 38.2% Fibonacci Level of the last major move lower, closing the gap and keeping prices from rallying higher. Use the 38.2% level as the line in the sand going into today’s session.
Forex Analysis by Raghee Horner at ForexPros. com
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