The EURUSD tagged the 1.2525 resistance handle for the second time ahead of Friday’s non-farm payrolls. It’s a level I mentioned on January 24 as the single currency was in the process of breaking above the 2008 crisis low at 1.2325.
Although the pair recovered from session lows on Friday, the 1.2525 resistance area is still holding. To the downside, we have the 2008 crisis low at 1.2325 which is now acting as support.
These two areas give us a 200 pip range to keep an eye on. Moreover, a daily close above 1.2525 or below 1.2325 would produce a range break opportunity.
A close above 1.2525 would target the next key resistance area at 1.2670. Alternatively, a daily close below 1.2325 would have us watching for a move lower toward the 1.2160 area.
If the uptrend since the start of 2017 is any indication, we should see buyers extend this rally over the next few weeks. At the time of this writing, I have no reason to believe that U.S. dollar weakness will subside over the longer term. But as always, I’ll let the market do the talking.
The five paragraphs above are what I wrote on Friday. However, after studying my charts over the weekend, I’m no longer (as) convinced that buyers are going to take prices higher without giving up some ground first.
I believe that Euro bulls have gotten ahead of themselves, and a cooldown period is in order. Of course, I could be wrong on that, in which case I’ll look for a daily close (using New York close charts) above the 1.2525 handle.
If we do see the EURUSD weaken first, traders can watch for a daily close below the 2008 crisis low at 1.2325. That would open the door for a move to the January 18 low at 1.2160 and perhaps even 1.2070.
I’m by no means saying the rally is over. There’s no evidence of that just yet. But a rotation lower does seem likely and would give the uptrend fresh legs.
Much like the EURUSD, the GBPUSD has been trading in a range since the January 24 rally. Key resistance comes in at 1.4335 while the 1.4070 handle, which is a level I mentioned last week, is holding as support on a daily closing basis.
The fact that buyers were unable to force a second retest of resistance at 1.4335 last week may suggest a pullback is in order. Still, as long as 1.4070 support holds on a daily closing basis (5 pm EST), shorts should tread carefully.
A close below 1.4070 would pave the way for a move toward the 1.3850 area. A break there would bring prices back to the January 3 high at 1.3610.
Alternatively, a daily close above 1.4335 would turn our attention to the next key resistance at 1.4565. But my base case for the week ahead is a reversion to the mean, particularly that of the weekly chart which currently resides near 1.3610.
The AUDUSD break below ascending channel support last week turned out to be a nice little trade. I mentioned how the pair had reached a key inflection point on Wednesday, and less than 24 hours later we had our break of channel support at 0.8050.
As we begin a new week, I don’t see any signs of sellers letting off the gas. In fact, the final moments of Friday’s session managed to carve a new low for the week.
Any rotation higher will likely encounter selling pressure at the mid to late January lows between 0.7955 and 0.7970. Key support lies just 40 pips below Friday’s close at 0.7880 with a break there exposing the January 10 low at 0.7805.
It’s worth noting that the AUDUSD has been moving in a considerable 700 pip range since the January 2016 low. I have no reason to believe that this structure has broken down, which means 0.7640 or lower is a genuine possibility over the coming weeks.
The USDCAD cleared a significant level on Friday. If you recall, the 1.2400 area was our target following the breakdown from range support at 1.2670 back on December 27.
The 1.2400 handle offered support in late July 2017 and more recently attracted a bid between the 5th and 19th of last month.
It makes sense then to assert that Friday’s 1.2425 close places buyers back in control. In fact, you can even see via the 1-hour chart where the USDCAD found selling pressure at 1.2405 before Friday’s close.
That said, I’m always suspicious of Friday breakouts. The lack of volume before the weekend increases the likelihood of false moves.
To avoid getting caught on the wrong side of the market, I’m going to monitor how price reacts to the 1.2400 area on Monday. A bullish price action signal could provide a favorable opportunity to get long.
Key resistance for the week ahead comes in at 1.2565 followed by former range support at 1.2670. Alternatively, a daily close (New York 5 pm EST) back below 1.2400 would negate the bullish outlook and re-expose the 1.2250 area.
The AUDJPY was all over the place last week. It seems the market was shying away from buying the yen, hence the lack of direction despite Australian dollar weakness.
On Monday of last week I pointed out the 87.20 level. It attracted buyers on January 10 and has been a critical factor on the weekly and monthly charts going all the way back to the late 1990’s.
While I still believe a daily close at 5 pm EST below 87.20 could open up the 85.40 area, it may not offer the “cleanest” of entries. Just look at how the price action has chopped around this area since August 2017.
However, I like the idea of pitting these two currencies together should the yen catch a safe haven bid over the coming days and weeks.
From a technical perspective, 87.20 is significant, but the confluence of support at 85.40 holds the key to much lower levels in my opinion. If we see the pair test 85.40 and buyers fail to hold prices above it, a 400 pip slide toward 81.50 may be in the cards.