Daily overview:
The price zone of 1.3560-1.3600 represented a valuable supply zone that kept the price below for almost two months. The pair was showing some bearish rejection manifested in the daily candlesticks as seen on October 10, a bearish engulfing daily candlestick. However, lack of bearish follow-up was witnessed around 1.3480. Instead, a signficant bullish rejection was expressed leading to a Flag continuation pattern.
According to the final readings of the European Statistical Office on Wednesday, European inflation hits 1.1% in September, according to preliminary projections it is settled at 1.3% in August. This constituted to the recent bullish jump that took place on Thursday.
The price level of 1.3560 is the upper limit of the most recent congestion zone. That is why the price action should be watched now as persistence of the current breakthrough and fixation above it enabled the pair to reach 1.3700 corresponding to an established high in Jan 2013.
After hiting 1.3700 at the end of last week, investors were waiting for US releases in order to define a clearer trend in the pair untill today when the US non-farm payrolls release was a great disappointment as NFP grew by only 148K in September, following the August increase of 193K, this lead to the current breakthrough above 1.3710. However, the situation remains nearer to profit taking towards 1.3650-1.3600 initially.
The projection target of the depicted Flag pattern is roughly located around 1.3800. However, technically the pair may need some time to achieve such a target having important levels on its way. Daily closure above 1.3710 is a must to achieve such a bullish target.
