Following the smallest weekly range since mid-November of last year, EURUSD carved out a bearish engulfing pattern last week, hinting at the idea that further losses lie ahead.
The key takeaway from that analysis, at least for me, is that this was the first weekly bearish engulfing candle to form at a swing high since May of 2014. That particular formation triggered a 3,500-pip selloff that lasted ten months.
While the previous week’s price action may not end up being as devastating for the pair, it is certainly something you don’t want to ignore. This is especially true for those contemplating any Euro long positions.
On the daily chart, the single currency will likely find selling pressure at the 1.1340 handle, a level that previously acted as resistance between February and March. A push lower from there would open up the door for a retest of the 1.1210 support level.
Alternatively, a daily close back above 1.1340 would expose the former long-term support level near 1.1500. While a retest of this area cannot be ruled out, it is unlikely that the pair would push through it as easily as it did the 1.1340 handle.
GBPUSD continues to coil between the 1.4050 support level and trend line resistance that extends from August of 2015. I have mentioned the pound several times over the last few weeks, noting that I’m reluctant to lean too far one way or the other at this point.
With that said, the price action since February does hint at a possible bullish scenario.
But the only way the two-month structure will pose a threat to sellers is by closing above trend line resistance that extends from the February high. Better yet, a close above the nine-month level from last August would all but guarantee a push higher over the near to medium-term.
However, as long as the pair trades near 1.4050 and doesn’t have a higher high to show for its efforts, we have to respect the downside risk. Such a scenario would materialize with a daily close below 1.4050, which would likely expose the current 2016 low at 1.3830.
I’m taking a “wait and see” approach here as the pair has yet to signal the direction it intends to pursue.
AUDUSD has had an impressive run over the last three months, gaining over 900 pips along the way. However, there is a reason to be nervous if you’re an Aussie bull.
I mentioned the upward sloping flag last week that has been in place since mid-March. The resistance level from this pattern happens to line up with a key pivot at 0.7800, an area that played a role in directing price action between February and June of last year.
To clarify, a flag structure that forms after an extended move in the direction of the prevailing trend can represent a sign of exhaustion. Think of a rising or falling wedge without the severe bullish or bearish implications.
From here traders can watch for a selling opportunity on a retest of the 0.7800 area as resistance. Channel support would make an ideal target, somewhere close to 0.7580.
On the flip side, if buyers manage to close the pair above 0.7800, we could see a retest of the May 2015 high at 0.8160 over the coming sessions.
EURCAD gave up more than 400 pips last week while closing below channel support that extends from the April 2015 lows. This break puts the spotlight on the next support level at 1.4060, which aligns with lows from November/December of last year.
I should note that this week’s open is already putting pressure on support-turned-resistance. As such, it may be prudent to stand aside and allow the market to make the first move. In other words, wait for a price action sell signal before committing to a position.
While the recent break of channel support doesn’t bode well for the bulls, we have to respect the recent surge in price. If buyers manage a daily close back above former channel support, we could see a retest of recent highs at 1.50.
AUDNZD made a significant move late last week, closing above the short-term trend line that extends from the March 23rd high. This area should, therefore, act as support moving forward.
The price action of late has been carving out an ascending channel that dates back to early February. As long as support continues to hold, we should see AUDNZD push higher in the coming sessions.
From here, traders can watch for a buying opportunity near 1.1060 with the next resistance level coming in at the March high of 1.1330.
Alternatively, should sellers manage to close the pair below channel support on a 4-hour closing basis, we could see the Aussie cross extend losses toward 1.0970 before finding a meaningful bid.