It seems the weekly bearish engulfing pattern that formed two weeks ago on EURUSD may yet have some validity. The key takeaway from that commentary was that the most recent engulfing candle was only the second to form at a swing high since May of 2014, just before the pair lost 3,500 pips.
While the familiar structure doesn’t mean that the pair will sell off in a similar fashion, it does signal that the recent rally could be coming to an end or is at least tiring. With this in mind, trader’s can begin watching for sell signals on retests of former support levels.
At the moment, the single currency is treading water just above the 1.1210 support handle, making any attempt at a short position unfavorable. However, if we should see a daily close below the level in the coming sessions, it would open the door for a retest of the December 2015 high at 1.1058.
As for upcoming event risk, things look relatively light for the Euro, but Wednesday’s FOMC statement is sure to shake things up for the US dollar.
Just when it looked as though GBPUSD would fail to close above the 1.4400 handle for a seventh time since March 29th, Friday’s close put the pair just above the critical level.
But as bullish as last week’s close may have been, any buying opportunity will have to wait, at least as far as I’m concerned. The trend line that extends from August of 2015 is too close to current levels to justify a long position.
As such, I will stand aside until the pair manages a daily close above the nine-month resistance level. Only then will I consider a position while keeping a close eye on February 2016 high at 1.4670.
And as for the larger opportunity that I mentioned on March 31st, it’s still in play as the pair never closed below 1.4050. So although the technicals aren’t quite as clean as they were then, the structure remains relatively bullish as long as the current 2016 low at 1.3830 endures.
The combination of Euro weakness and pound strength of late has put EURGBP under significant pressure. However, last week’s move wasn’t too surprising considering where the pair has been trading within the large descending channel that extends from the 2008 high.
As for an immediate opportunity, Friday’s close put the Euro cross below the key 0.7840 level. This area can be seen acting as resistance in February and early March before later supporting prices later in the month.
While the level is fairly obvious, it isn’t something I would want to attempt a short from without first seeing the right bearish price action. With this in mind, any sell signals in the form of a bearish pin bar in the coming week could present a favorable opportunity to get short.
The first support level comes in at 0.7700, an area that will likely offer buyers a reprieve, albeit a temporary one.
GBPNZD has finally made its move, closing above wedge resistance that extends from the September 2015 highs. Friday’s break was a long time coming as the pair had threatened to break out on several occasions in March but never quite made it.
For those who saw my NZDUSD commentary at the end of last week, this is the trade that I referenced as one that could “last a bit longer” should the kiwi continue to weaken.
Last week’s close brings with it fresh opportunity to begin watching for buy signals from former resistance. One area that could offer support on a pullback is 2.0850. This level can be seen acting as support in early March and resistance at the beginning of April.
The upside looks promising, with the first resistance level not coming into play until 2.1500, an area that is marked by several lows between December of 2015 and February of this year. The level later acted as resistance, pushing the pair lower by 1,000 pips.
Considering how GBPNZD ended the week, I would expect to see the recent bullish momentum take us to the 2.1500 handle in the short-term. However, Friday’s break of the eight-month resistance level could very well be the next leg higher after last year’s 6,000-pip rally.
CADJPY surged higher on Friday following Wednesday’s close above channel resistance that extends from the June 2015 high.
I had planned to release commentary on the yen cross following the mid-week break. However, I held off considering the pair had yet to clear the 87 handle. This level was mentioned extensively in the March 30th commentary.
With prices now firmly above 87 on a weekly closing basis, traders can begin watching for buying opportunities on a retest of the level as new support. Resistance comes in at 88.90 and 90.65, which is the 2014 low among other things.