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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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On Friday, I pointed out a trend line on the EURUSD that extends from the 2017 low. The level connects with the April 2017 low and was responsible for the recent May 30th bounce.
However, the June 14 impulsive selloff leaves me doubting whether the pair can muster enough demand to push the single currency back above the current June highs at 1.1850.
One resistance level that could trigger a reaction before then is 1.1720. You can see how this area has served as a pivot over the last four weeks. It was also a key influence on the EURUSD between August and December of last year.
As mentioned on Friday, I won’t entertain a short here until the 2017 trend line breaks down on a daily closing basis. Remember, I use New York close charts where each session closes at 5 pm EST. You can get access to the same charts by clicking here.
A break lower would expose several key support levels including the November 2016 high at 1.1290 followed by 1.1125. Alternatively, a move higher from current levels would likely encounter selling pressure at 1.1720 followed by 1.1830.
Before I point out any levels on the GBPUSD, I will say that I’m not overly fond of trading the pair at this time. The price action has transitioned from trending to a bit of congestion since reaching the 1.3300 area at the end of May.
With that in mind, it’s going to take a daily close (New York 5 pm EST) above the 1.3460 area to reverse the downtrend. Until that time, expect to the GBPUSD to remain under pressure on retests of new resistance levels.
Namely, keep an eye on the 1.3300 handle as well as 1.3460. Either level could trigger a sell signal.
Support for the week ahead comes in at 1.3160 followed by the October/November 2017 lows at 1.3040.
The USDJPY has been difficult to read of late. Just when it looked as though sellers were regaining control in late May, buyers have battled back this month with a 280 pip rally.
Furthermore, while the pair has struggled to retest the May 21 high (suggestive of a bearish outlook), the last two months have carved a descending channel. This is not what you want to see if you’re bearish the USDJPY.
I’m not insinuating that this is a bullish pattern, though. I don’t have enough information to make that call just yet.
However, the combination of the 670 pip rally that began in March and the recent descending channel also leaves me hesitant to take a bearish stance. As such, I’m neutral on the USDJPY at the moment along with the yen crosses.
Key support for the week ahead comes in at 108.65 with resistance coming in near the 110.50 area.
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The GBPCAD gained ground for six consecutive sessions starting June 14th. However, Friday’s bearish pin bar from the 1.7740 area could suggest a move lower this week.
That said, I’m always particularly cautious of signals that form on a Friday. The lack of volume ahead of the weekend means we only get a partial view of market sentiment.
One thing that caught my eye over the weekend is the potential head and shoulders that has developed since the November/December 2017 swing high. The two shoulders aren’t as uniform as I’d like, but they do share the same horizontal plane to some degree, so it does qualify.
As long as the 1.7740 resistance area holds on a daily closing basis (New York 5 pm EST), the GBPCAD is vulnerable. Key support on the way down is more challenging to identify, but I think there’s good reason to keep the 1.7400 area marked on your chart.
Note that the head and shoulders below is purely speculative at this point. The pair would need to close below the neckline near 1.7150 in order to confirm the 1,500 pip reversal pattern.
The EURAUD has been on a tear so far this month. The current 430 pip rally comes on the back of an 860 pip decline that commenced with the April 25 bearish pin bar.
But this month’s gains have more to do with Australian dollar weakness than Euro strength. Neither currency has been strong relative to the greenback, but it’s clear from the chart below that the Australian dollar has been the weaker of the two.
However, that may be about to change. The Euro cross is fast approaching a level that could pose a problem for buyers.
The 1.5775 handle has had a significant influence on the pair since the 2017 high carved on December 1st. Since that time, the EURAUD has reacted to 1.5775 as both support and resistance on multiple occasions.
Perhaps a more significant development, though, is the potential 970 pip head and shoulders that has developed since the 2018 low at 1.5154. You can see the entire pattern in the June 20 commentary.
To be clear, the structure I mentioned last week is purely speculative at this point. It’s going to take a rejection from the 1.5775 area followed by a close below the neckline near 1.5320 to confirm the massive (potential) reversal pattern.
I may decide to front run a move lower, but only with the right bearish price action following a retest of 1.5775. If a sell signal doesn’t materialize, I will stand aside.
Should the EURAUD confirm the reversal pattern, a move to the July 2017 low at 1.4420 should not be ruled out. That’s about 1,350 pips from the 1.5775 region.
Alternatively, a daily close (New York 5 pm EST) above 1.5775 would make the task for sellers that much more difficult. And a move above 1.6000 would all but negate the pattern.
I’ll be the first to admit that the notion of buying the Australian dollar right now is unsettling to say the least. That said, the Euro hasn’t fared much better and is currently hanging by a thread against the U.S. dollar.
With that in mind, it isn’t all that difficult to envision a lower EURAUD.
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