Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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The EURUSD bounced higher last week from trend line support that extends from the 2017 low. I mentioned the 1.1620/30 support area on Wednesday of last week, noting that sellers needed to secure a daily close below it to expose downside targets.
That never happened. Instead, buying pressure between Wednesday and Thursday kept prices above the critical support area.
You’ll notice that this trend line did give way once between the 27th and 28th of June. However, that turned out to be a false break, and the level has held as support since.
For the week ahead, the 1.1720 handle will be the level of focus. This is the resistance area that capped last week’s advance and is also Friday’s closing price.
EURUSD bulls need a daily close (New York 5 pm EST) above 1.1720 to open the door to higher levels including 1.1830 and 1.1940. From where I’m sitting, that seems to be a likely scenario given the recent demand above the 1.1630/40 area.
Alternatively, a daily close below the 2017 trend line would turn our attention to range support at 1.1530. Until the pair manages to close above resistance at 1.1720 or below support near 1.1630/40, I will remain on the sideline.
The GBPUSD also rebounded higher last week from descending channel support that extends from the May 29th low. I’ve pointed out this pattern a few times in recent weeks.
Buyers also managed to close the pair back above the June 28th low at 1.3050. As such, any rotation lower into this area will likely be met with an influx of buying pressure.
A few of you have asked if I’m buying the GBPUSD. While you could have entered long during Thursday’s retest of channel support, I prefer to wait until the pound clears channel resistance near 1.3230. Until then, it’s too risky to buy a falling market such as this.
So you see, I’m not exactly bullish the GBPUSD, at least not yet. As long as the pair remains under pressure (trading within the confines of this channel), I’m more neutral to bearish.
Only if buyers can clear the upper boundary of the channel near 1.3230 will I become slightly bullish in the short-term. I won’t turn all out bullish given the current downtrend, but a close above the 1.3230 region could open the door to 1.3460 and perhaps 1.3600.
USDCAD bulls hit a significant roadblock on Friday. In fact, it’s the same resistance area we discussed at the start of last week.
The 1.3260/80 area is the intersection of the June 22nd and 25th lows and ascending channel resistance that extends from the October 2017 highs.
Friday’s rejection from the area was so intense that the USDCAD lost 50 pips in just 60 seconds. I know some will claim the 50 pip drop was the result of Canadian retail sales, CPI, or both. And you’d be correct from a purely fundamental perspective.
However, I can point out numerous occasions every week where fundamentals and technicals collide. At what point does it stop being a mere coincidence?
The fact is that the two (fundamentals and technicals) are not mutually exclusive. In other words, they can and do coincide and even compliment one another. Look no further than what happened to the USDCAD on Friday.
Now, keep in mind that there are a couple ways to draw the trend line you see below. One is how I plotted it last Monday, and another connects the May 22nd and July 11th lows.
If you use the former, the pair broke support before the weekend. However, if you use the two lows from May and July, the pair closed the week just above the support level.
Note that 1.3120 is also the location of a relatively significant horizontal level. As such, it may be prudent to wait for a daily close (New York 5 pm EST) below the 1.3120 area before considering an entry.
A daily close below the 1.3120 area would expose 1.3010 followed by 1.2870/80. Longer term, as long as the pair remains below that 1.3260/80 resistance area, a move toward ascending channel support near 1.2550 should not be ruled out.
The price action on the GBPJPY worked out nicely for us last week. On Monday I discussed how the risk-sensitive pair was in the process of testing key resistance at 149.00.
The 149.00/30 region is the location of former channel support that extends from the April 2017 low. It’s the same level that produced the selloff that commenced between the 6th and 7th of June.
Shortly after I published Monday’s post, the GBPJPY formed a bearish pin bar. A 50% entry of that signal would put you in the green by more than 200 pips as of Friday’s close.
Speaking of Friday’s session, you can also see how the pair tested resistance a 146.60/70 after closing below it on Thursday.
If you look closely at my post from Monday, you’ll notice that I had 146.60/70 (146.67 to be exact) drawn on my chart. Friday’s high was 146.66.
As long as the pair remains below this area (146.60/70) on a daily closing basis (remember, I use New York close charts which you can get here), I will remain bearish and continue to look for selling opportunities.
Key support for the week ahead comes in at the 144.00 handle. The level has given way a couple of times on an intraday basis, but sellers have yet to clear the area on a daily closing basis.
The GBPCAD has been a fun and yet somewhat frustrating pair to trade over the last four weeks.
It all started with the June 22nd bearish pin bar which I pointed out in the June 24th weekly commentary. Again, using a 50% entry would have given you an excellent entry at 1.7680 and a drawdown of just 9 pips. You’d also be up more than 400 pips as of Friday’s close.
Then came the somewhat frustrating part if you were short from the June 22nd pin bar unless, of course, you closed your position on or before the 28th of June.
Following that close below 1.7440 on June 28th, the GBPCAD entered a 140 pip range that would persist for the next thirteen trading days.
However, last Wednesday’s 1.7204 close put an end to that. I released a commentary the same day noting that 1.7300 is now resistance. I also wanted to see how the GBPCAD would react to neckline support near 1.7160.
We got our answer just 24 hours later. Both Thursday and Friday caught a bid at 1.7160/70. That tells me that market participants are indeed keeping an eye on the support level that extends from the year to date low (blue level below).
From here, I’d like to see the 1.7300 handle hold as new resistance on a daily closing basis. That said, the larger play won’t materialize until sellers clear neckline support near 1.7170/80.
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