The EURUSD has enjoyed four positive weeks in a row since catching a bid at 1.0500. The pair continued its slow and steady rally last week with a Tuesday bounce from the 1.0712 support area.
However, sellers have yet to achieve a daily close above the 1.0825 handle. This is a level that dates all the way back to 1999, so a break here isn’t likely to come easy.
The 1.0825 level is also the 38.2% Fibonacci retracement when measuring from the 2016 high at 1.1615 to the current 2017 low at 1.0340.
As long as the pair trades below this area on a daily closing basis, my bias remains weighted to the downside. With that said, only a proper sell signal from resistance would be enough to get me off the sideline.
For now, the jury is still out on whether the EURUSD has carved out a four-month inverse head and shoulders pattern. For that to become a probability rather than a possibility, I’ll need to see a daily close above 1.0825.
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I mentioned the GBPUSD on Tuesday noting that a daily close above 1.2410/20 could offer a buying opportunity. Not only did buyers manage a close above this area, but they also held their ground on Wednesday with a session low of 1.2422.
With the pair firmly above the (former) confluence of resistance at 1.2410, I suspect any retest of the area will attract buyers.
Note that we could see some volatility from the pound this Wednesday due to Article 50. I never trade the news but knowing that this event could spark unfavorable conditions is enough to keep me sidelined for now.
The next minor level of resistance comes in at the February 24th high of 1.2568. Beyond that, we have the current 2017 high near 1.2670. Alternatively, a daily close back below the 1.2410 area would negate the somewhat bullish outlook.
Apart from Monday’s session, the AUDUSD lost ground every day last week. It started with Tuesday’s bearish engulfing day and ended with a slight loss on Friday after a test of 0.7608 support.
A quick study of the weekly chart shows what appears to be a twelve-month wedge pattern. The structure began developing after the 2,600 pip landslide that took place between June 2014 and January 2016.
Given that this wedge has formed after a steep downtrend, it could very well be a bearish continuation pattern. But like every terminal structure, we won’t have a definitive answer until the market breaks support or resistance.
For the week ahead, sellers need a daily close below 0.7608 to further last week’s decline. Such a break would expose the next level of support at 0.7500. Alternatively, a bounce from current levels would likely encounter selling pressure near 0.7725.
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The GBPJPY seems to be holding below the 138.90 handle on a daily closing basis. I mentioned this area on Wednesday amid a flight to safety, which caused the yen to appreciate.
By the end of Wednesday’s session (5 pm EST), the pair had closed below 138.90. However, it was a marginal break with just 15 pips between the session close and the 138.90 level. With that said, sellers held this area as new resistance during the last 48 hours of trade.
This leaves us watching for selling opportunities so long as the pair remains below the 138.90 region on a daily closing basis. Key support comes in at the current 2017 low of 136.45.
The AUDJPY is another yen cross I mentioned last week. The close below the 85.35 handle is likely to keep the selling pressure intact for the week ahead. This area has been a key factor for the pair since early January.
From here traders can watch for selling opportunities on a rotation back to the 85.35 area. Key support for the new week comes in at the December 2016 low of 83.73.
If sellers can manage a daily close below 83.73 over the coming sessions, we could see the AUDJPY retest the 82.50 handle. This area capped a mid-November 2016 rally and is also the 50% retracement of the U.S. elections rally that began on November 9th.
As I mentioned last week, the fact that the yen pairs are starting to move in tandem could signal favorable conditions ahead.
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