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The EURUSD remained range bound last week between 1.1730 support and 1.1860/70 resistance. In fact, the single currency has been stuck in a 500 pip range since closing above 1.1550 on July 20.
For the week ahead, not much has changed since the last weekly commentary. As long as the 1.1730 area holds as support on a daily closing basis, the current range should be respected.
If sellers manage a close below 1.1730, there is another key support level not far below at 1.1670 followed by 1.1550.
Alternatively, a close above the 1.1860/70 area would pave the way for a move toward 1.2040. Keep in mind, however, that buyers would almost certainly face some selling pressure at 1.1945 on the way up.
All in all, the EURUSD price action of late is unappealing to me. With no apparent bullish or bearish momentum, catching a favorable risk to reward ratio will be a challenge.
I also believe there are better opportunities such as the EURNZD or even EURCHF, which we’ll get to momentarily.
Much like the EURUSD, the GBPUSD lacks direction. After closing above the 2014 trend line on November 29, the pair has gone nowhere fast.
That said, as long as the confluence of support at 1.3260/90 holds as support on a daily closing basis, the bullish scenario must be respected.
A move higher would first target 1.3445, although the area has become less reliable in recent weeks. Above that, we have the late November/early December swing high at 1.3545 followed by the current 2017 high near 1.3650.
Alternatively, a daily close at 5 pm EST below the 1.3260/90 area would suggest that sellers have regained control. It would also expose the October and November lows near 1.3020/30.
I’m going to remain on the sideline until a clear and favorable opportunity presents itself.
The USDJPY was back on the offensive on Friday. However, the pair is once again trading below the 113.15 handle after Wednesday’s 112.51 close.
We looked at the USDJPY on the 13th of December when prices were teetering on 113.15 just hours before the Fed rate decision and statement. In that post, I pointed out how a daily close below the key level would begin to erase the prior week’s bull move.
As you can see from the chart below, last Wednesday’s 100 pip decline just about did that on its own.
Technical analysis 101 tells us to watch for a retest of 113.15 as new resistance this week. However, there is a 4-hour pattern that may prevent that from happening.
The ascending channel in the chart below broke down during Thursday’s session. We can even see how buyers attempted to prop up prices for 16 hours before they finally gave in to the selling pressure.
For the week ahead I’m going to keep an eye on the area between 112.70 and 113.00. Any bearish price action in this region would produce a favorable short opportunity.
The next key support comes in near the November lows at 111.00. Keep in mind that we could also see buyers step up at the late-September and mid-October swing lows at 111.60.
As long as prices remain below former channel support on a 4-hour closing basis, I will remain bearish here. I don’t anticipate an extended move given the holiday liquidity drain that is upon us.
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On December 6 we looked at the EURNZD. In that commentary, I pointed out how the 2017 rally may be coming to an end. The pair was trading at 1.7132 when I published that post.
Since that time the Euro cross has given up 340 pips. More importantly, it closed last week at 1.6798, well below rising wedge support.
I even named this my top trade idea to close out 2017. It’s one of the better technical structures in the market right now, particularly given the choppy and indecisive price action we’re seeing across the majors.
Last Wednesday’s close at 1.6832 sealed the deal. Sellers finally cleared wedge support on a daily close basis (using New York close charts).
Then on Thursday buyers pushed prices higher to retest former support as new resistance. Thursday’s upper wick just barely pierced the resistance zone between 1.6950 and 1.7000. I mentioned this area shortly after Wednesday’s session closed.
As long as the pair remains below former wedge support on a daily closing basis, I will stay bearish. The first key support comes in at the November low at 1.6620. A close below that would expose 1.6140.
I mentioned this EURCHF upward sloping flag on November 6. At the time the pair was trading near 1.1593 and hadn’t really tested channel support.
Fast forward to today, and we can see how buyers have struggled to make much progress. While they’ve managed to hold prices above support at 1.1620/30, they haven’t been able to break the late October swing high just above 1.1700.
Upward and downward sloping flags are less common than bull and bear flags. However, they suggest a similar outcome to that of rising and falling wedges, such as the one above on the EURNZD daily chart.
I could make the argument that this is, in fact, a rising wedge. An upper level drawn from the August high would do the trick. But regardless of where you place the top level, the implications are the same.
Because this is an upward sloping flag, we know that EURCHF buyers are tiring. With this in mind, I will be watching for a daily close below channel support at 1.1620/30. Such a break would first expose the 1.1500 area.
Patterns like the one below tend to target their inception point. In the case of the EURCHF, that’s the August lows at 1.1260. But until sellers manage a daily close below 1.1620/30, there isn’t anything to do here.
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