EURUSD continued its gradual slide lower last week, shaving off another 75 pips since the July 5th retest of former channel support. That puts the pair’s losses at over 200 pips in the month of July.
Although buyers managed to push prices above the 1.1060 handle last Monday, that strength didn’t last long as the single currency quickly lost 60 pips in the following session.
I continue to favor selling the EURUSD as long as prices hold below former channel support that extends from the December 2015 low. This pattern combined with the June 24th breakout are eerily similar to last October’s close below the eight-month channel support.
In the coming sessions, traders can watch for a selling opportunity on a retest of recent lows near 1.1020. Alternatively, a close below the 1.0940 handle would expose the March 10th ECB low at 1.0820.
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GBPUSD traded within the pair’s smallest weekly range since early May last week. Whether this is a bearish continuation signal or a sign of an upcoming relief rally is unclear at the moment.
Just like last week’s price action, not much has changed for me concerning my intentions with this pair. The lack of favorable movement has kept me on the sidelines, and I believe there are better opportunities out there.
For those intent on trading the British pound against the US dollar, look for a bid to form on a retest of the 1.30 handle while sellers continue to gather near 1.3500. A close below 1.30 would expose 1.2500.
AUDUSD has jumped to the top of my watch list with last week’s close below the trend line that extends from the May low at 0.7145. This was a possibility that I mentioned on Thursday, which has now fully materialized.
However, given the proximity of Friday’s close to the two-month level, the first 24 to 48 hours of this week should be telling.
Additional selling pressure between 0.7460 and 0.7480 could trigger a move toward the next key support level near 0.7330. This area is the intersection of channel support from the current 2016 low at 0.6827 as well as multiple lows from June.
In the week ahead traders can watch for a selling opportunity on a retest of former trend line support as new resistance. As long as sellers can hold prices below this level on a 4-hour closing basis, a move toward the 0.7330 area seems likely.
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Like AUDUSD, NZDUSD lost additional ground last week, closing below the key 0.7080 handle. Any retest of this area in the coming session will likely attract considerable selling pressure.
I have received several emails over the weekend asking about the bullish rejection that formed on the daily chart as a result of last Thursday’s retest of the 0.6970 support level.
While last Thursday’s price action could trigger a move higher from current levels, the NZDUSD remains a sell for me. I’m of the belief that the July 15th close below ascending channel support was a significant and telling move.
The only thing that would challenge this idea would be a daily close back above 0.7080. However, even then buyers would have their work cut out for them.
A 4-hour close below the 0.6970 support level would expose the next critical level at 0.6840.
GBPAUD may be on the cusp of breaking down from the relief rally that began on July 11th following the 2,600 pip Brexit-inspired selloff.
But as I mentioned on Friday, there is one thing stopping me from trading the break you see below, and that is the positive correlation between GBPAUD and AUDUSD.
As noted above, I’m bearish the Aussie so long as the currency trades below former trend line support against the greenback. This means that holding a bearish view of GBPAUD could be seen as a contradiction.
With that being said, correlations are in a constant state of flux. So just because the two are correlated today doesn’t mean they will be tomorrow as these relationships can often break down quite fast in some cases.
Whether the GBPAUD losses ground this week will likely depend on the British pound. If the currency continues to weaken and manages to outpace the Aussie, there’s a good chance the pair will revisit the multi-year low at 1.7050.
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