EURUSD finished off another positive week after rallying 240 pips from the open. However, there is one level that stood in the way last week, one which I believe could break the pair’s win streak in the week ahead.
Last weekend I commented on the former channel resistance that extends off the 2015 low, noting that it would act as strong resistance should the pair test it. Sure enough, the level rejected the bull’s advance during last Thursday’s session.
At the moment, it looks as though we could see a larger pullback in the Euro. However, before such a move can materialize, the pair needs to clear the 1.12100 handle on a closing basis. Below that we could see the pair extend losses toward former highs near 1.1060.
Keep in mind that Mario Draghi is scheduled to speak at 9am EST, which could shake things up to start the week.
GBPUSD ended last week unchanged after testing both 1.4357 support as well as 1.4565 resistance. The latter is actually the 2015 low and is therefore a key level the bulls must break if they intend to push prices higher from here.
While the price action in the short-term could remain neutral to bullish, I’m still largely bearish given the downtrend that has been in place since the second half of 2014. As such, I favor selling rallies at resistance, but not until the pair has had enough time and space to revert back to the mean on a weekly basis (currently near 1.4800).
A close above resistance at 1.4565 would expose the 1.4800 handle, while a close below support at 1.4357 would suggest that a retest of the current 2016 low at 1.4078 is in order.
NZDUSD continues to search for direction as the pair has now been trapped in a 650-pip range since June of last year. However, there are now two trend lines in play that could lead to a breakout in the coming sessions.
First and foremost, the upper boundary of the terminal pattern shown below is defined by a well-worn level that extends off of the April 2015 high. As of last week’s close, this level has been tested on four separate occasions.
Although much newer, the lower boundary of the wedge that extends off of the current 2016 low has been tested on three separate occasions, making it a valid level to trade from.
From here things get pretty simple. A close above wedge resistance would expose the area between the 2015 close and the December 2015 high (0.6835 to 0.6880). Alternatively, a close below wedge support would expose the current 2016 low at 0.6346.
I mentioned GBPAUD on Thursday of last week, noting the wedge that had formed inside of a larger descending channel. This channel began last August and continues to dictate the overall direction of the pair.
While the channel in and of itself could eventually present a favorable opportunity, there is also a smaller terminal wedge that has formed on the 4-hour chart.
A close below trend line support would expose confluent support near 2.00. On the other hand, a close above wedge resistance would open the door for a retest of the channel ceiling near 2.0900.
AUDJPY managed to find a bid last week but not before falling to a new thirty seven-month low. The 79.20 key support level that supported prices during Thursday’s session is the January low as well as several prominent swing lows from the second half of 2012.
The final 48 hours of last week suggests that we could see the pair move higher in the week ahead. However, given the larger channel break that occurred last year and the price action so far in 2016, I favor selling rallies into resistance.
The first level of interest is 82.25 followed by the 86.40 area. Although either of these two levels could reject a bullish advance, the volatility of late demands the presence of a proper sell signal before a short position is taken.
Alternatively, a close below 79.20 would open the door for a move to the 2012 low at 74.50, making it a key level to keep an eye on as the bearish sentiment continues to build.