EURUSD continues to trade within a descending channel that is best seen on the 4 hour chart. This channel extends off the April 6th high and has now rejected the pair on two separate occasions this month.
So where do we go from here? There are two scenarios I’m watching as we head into the second half of the week.
The first and perhaps more likely scenario is a daily close below the 1.0658 key handle. Such a close would have us looking for a sell signal on a retest of the level as new resistance. Key support from there would come in at 1.0470.
The other scenario involves a daily close above channel resistance. In which case we could watch for bearish price action on a possible retest of the 1.1035 key resistance level.
I’m only interested in sell signals for the time being due to the bearish pressure that has persisted for almost one year now.
Summary: On the sidelines for now. A daily close below 1.0658 would have us watching for bearish price action on a retest of the level as new resistance. Alternatively, a break above channel resistance would have us watching for bearish price action on a retest of the key 1.1035 resistance level.
GBPUSD on the other hand is more appropriately defined by horizontal levels. Those levels include the notable 1.4980 level, which formerly acted as support between January and February and has now rejected price for four straight weeks as resistance.
The most obvious and perhaps more favorable play would be a daily close above 1.4980. Such a close would have us watching for bullish price action on a retest of the level as new support. The next resistance level from there is clearly defined at 1.5200.
However if the bears continue to have their way we could see the market move back into support at 1.4700. This level is defined by several lows from March. If 1.4700 breaks we could see a retest of the multi-year low at 1.4570. Of course a break below this level would be a much harder task for the bears.
Summary: On the sidelines for now. A daily close above 1.4980 would have us watching for bullish price action on a retest of the level as new support. On the other hand, a move back to 1.4700 and possibly 1.4570 should not be ruled out as a possibility.