EURUSD is set to remain as a top priority for many traders in the coming weeks, especially given the recent result of the referendum in Greece. However I’m of a different mindset in terms of where my priorities lie as a trader.
The future of the Euro has been making headlines and will continue to do so for the foreseeable future, however with these headlines comes increased volatility. As such I prefer to place my capital in pairs that have a more attractive structure from a risk to reward perspective. More on this later.
The EURUSD will likely remain in a state of indecision until there is a clear outcome for Greece, which could take quite some time. With indecision comes a lack of follow-through, an attribute that should be at the top of every trader’s mind before diving into any position.
All of the above makes trading the EURUSD an unattractive option at the present time, especially given the fact that there are more favorable setups taking shape in other currency pairs.
Summary: Staying on the sidelines for now. Immediate support comes in at 1.1050 and 1.0820 while resistance lies at 1.1150 and 1.1280.
Although more insulated from the drama unfolding in Greece, GBPUSD is in somewhat of a similar situation to that of its EURUSD counterpart.
The pair faces immediate support at 1.5500, which is defined by the April high along with channel support from April 13th. To the upside, the 1.5680 level has been a major factor along with the May high at 1.5814.
While these levels may produce a favorable setup in the near future, the real potential would likely come on a break of either channel support or trend line resistance from February.
These two levels form what appears to be a rising wedge pattern, something that could provide traders with a more profitable opportunity than attempting to trade the current range.
Summary: Wait for a break of either channel support or trend line resistance and then look to trade in the direction of the break. Support and resistance levels to be discussed upon a breakout scenario.
AUDUSD made a surprise move to the downside during Friday’s session. The pair had been mostly sideways for the better part of five months before breaking to fresh six-year lows to end the week.
This break will likely attract selling pressure as the new trading week commences. Of course it all depends on how we open, but sellers can watch for opportunities on a retest of .7550 as new resistance.
Although .7485 and .7410 could provide some immediate support, the downside potential here looks to be much greater. A move to retest trend line support from the 2001 lows could be in order, eventually placing the pair in the .7250 region. Break that and we could see a move to .70 and possibly lower over the coming months.
Keep in mind that the RBA rate decision is this Tuesday at 12:30am EST, so expect increased volatility in all Australian dollar pairs at that time.
Summary: Watch for selling opportunities on a retest of .7550 as new resistance. Support comes in at .7485 and .7410 with a longer-term objective near .7250.
I mentioned AUDJPY in last week’s commentary noting the possibility of another retest of weekly channel support. The chart below shows the level in question.
Sure enough, the pair found resistance at 94.55 after breaking through the level on a gap down at the start of last week. The bearish pin bar that formed at this level provided us with a favorable selling opportunity on Wednesday of last week.
By the end of the week the pair was trading just 70 pips from weekly channel support. A daily close below this level would open up the possibility of a much larger decline as risk aversion picks up.
Note: Be careful with any gap down to start the week as such a gap could fill later in trading week, just as AUDJPY did last week. Use patience and pick your entries carefully.
Summary: Wait for a daily close below channel support and/or watch for bearish price action from these levels. Key support comes in at 90.20 and 89.35 with a longer-term target of 86.40.
My short position in NZDJPY continues to grow ever since the pair formed the second shoulder of the head and shoulders pattern in late April. The reversal pattern was confirmed on June 18th and has since provided traders with plenty of selling opportunities over the past two weeks.
Here is the NZDJPY weekly chart showing the major reversal pattern.
From here, NZDJPY faces a similar gap down situation as that of AUDJPY. Which means patience is in order as the gap could close within the next 24 hours.
That said, I will treat any bearish price action below 82.21 as an opportunity to add to my existing short position.
Summary: Look to sell at support-turned-resistance so long as the bearish momentum persists. Measured objective based on the head and shoulders pattern comes in at 75.00.
