EURUSD bulls were repelled once again on Thursday. The same 1.1720/30 resistance area that served as a pivot in May and June capped last week’s advance.
In fact, it stunted Monday’s rally attempt as well as Thursday’s. The latter even carved a bearish engulfing range to illustrate just how much selling pressure exists in the 1.1720/30 region.
As for support, the 2017 trend line I’ve pointed out several times of late came to the rescue again. The level did fail once on June 28th, but buyers have held their ground since.
Given the 900 pip decline that commenced in late April combined with the recent sideways movement, I’m more bearish than I am bullish. At the moment, the price action since early June looks more like a continuation pattern than anything else.
It seems it’s going to take a daily close (New York 5 pm EST) below the trend line near 1.1650 to expose the multi-month range low at 1.1530. Alternatively, a daily close above 1.1730 is needed to pave the way for a move to the next key resistance at 1.1830.
The GBPUSD was relatively uneventful last week, and neither buyers nor sellers made much headway.
For the last ten weeks, the pound has moved lower within the confines of a descending channel. We saw the upper boundary of this pattern come into play on July 9th and again on the 16th.
On the opposite side, channel support came to the rescue during the July 19th session. But although buyers managed a close back above 1.3050, last Thursday’s bearish engulfing range casts doubt over a move higher in the near-term.
Another indication of weakness is the fact that last week failed to retest channel resistance at 1.3230.
That said, I’m not interested in buying or selling the GBPUSD at the moment. While the pair is still relatively bearish while inside this descending channel, there’s too much congestion for me to justify an entry.
It’s going to take a daily close at 5 pm EST above channel resistance to expose the next key level at 1.3300 and perhaps 1.3460. Until that time, expect the GBPUSD to remain under pressure with key support for the week ahead coming in at 1.3050.
USDCAD sellers cleared a significant area last week. The confluence of support at 1.3120 propped up prices early in the week, but Wednesday’s 1.3045 close changes everything.
The 1.3120 region is now resistance with support coming in at 1.3010/25.
Last week’s breakdown should be no surprise to readers. I first pointed out the idea that the USDCAD could begin to struggle in the July 1st weekly commentary.
It was the false break above the ascending channel top (19th – 28th of June) that gave it away. I’ve since written about a potential decline several times in recent weeks, including the July 20th commentary.
The pair is now at risk of further losses. While 1.3120 is the key resistance level to keep an eye on, there is also reason to watch the 1.3065 area. It’s been a pivot since early June and also capped advances on Thursday and Friday of last week.
However, I wouldn’t short the pair down here given the distance between today’s price and the 10 and 20 daily EMAs. I’d rather wait for a retest of 1.3120 as new resistance or a daily close (New York 5 pm EST) below the 1.3010/25 region.
If you’re struggling to find a favorable entry here, the GBPCAD could be a proper alternative, particularly if you’re bearish the pound.
As for the USDCAD, I do think we could see an extended move lower over the coming weeks. The lower level of the ascending channel that extends from the September 2017 low could make for a prime target. That level comes in between 1.2550 and 1.2600.
On Tuesday of last week, I pointed out a smaller ascending channel on the EURCAD that could offer a breakout opportunity. Just 24 hours later sellers managed a close below channel support as well as the 1.5315 horizontal level.
One thing to note here is the length of the move from June 25th to July 4th. That distance was exactly 300 pips. If you measure the distance from the July 20th high to Friday’s low, you also get 300 pips (295 to be exact).
That tells me that we could see a bounce higher to start this week. And if not from Friday’s low, the pivot at 1.5150 will surely attract a bid on the way down.
However, my bearish bias is unchanged. While I do think the EURCAD could move higher in the interim, the price action over the last eight months or so points to an extended move lower.
Although they don’t always move in tandem, the price action on the GBPCAD (see commentary below) also points to further weakness. I would never trade one pair based solely on the other, but it is an additional clue we can use.
I remain short the EURCAD from the end of June at 1.5580, an entry I wrote about in the member’s area. I also added to the position last week at 1.5300.
GBPCAD sellers finally did it. I’ve suspected a head and shoulders reversal here for several weeks. In fact, it’s been more than a month now as it all started with the June 22nd bearish pin bar which you can read about here.
Last Thursday’s close below neckline support confirms the massive 1,500 pip head and shoulders pattern. That does not mean the pair will move lower, but it is the likely path forward given Thursday’s breakdown.
Key support as mentioned last week comes in at the May low of 1.7060. A daily close below that wouldn’t encounter a meaningful bid until the 1.6820 area which is also the 61.8% Fibonacci of the September 2017 to March 2018 range.
Alternatively, a daily close back above the neckline near 1.7200 would negate the bearish outlook.