Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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The EURUSD broke some significant support levels last week. Thursday’s massive 290 pip range took out the previous ten sessions and also closed well below the 2017 trend line I’ve illustrated in previous weekly forecasts.
I fired a warning shot last Monday with the post titled “EURUSD Looks Vulnerable Despite Recent Gains”. Although I couldn’t have anticipated a 300 pip drop within 72 hours of that commentary, the single currency did look relatively weak against the dollar.
For the week ahead, a retest of the 1.1650 area will likely attract selling pressure. And even if buyers manage to break above this area, the trend line from 2017 comes in just above 1.1650 near 1.1670.
Key support is found at Friday’s low of 1.1540. From where I’m sitting though, any bounce this week will likely provide temporary relief given last week’s impulsive selloff.
The GBPUSD closed back below the 1.3300 handle on Thursday. A glance at the price action between September and December of last year shows how the level has influenced the pair’s direction.
That close below 1.3300 came on the back of a bearish engulfing day. In fact, the range of Thursday’s session took out the previous four days.
With the GBPUSD back below 1.3300, I would expect to see an influx of selling pressure on any retests of the area as new resistance. That’s what we saw on Friday when the pair reached a high of 1.3298 before losing some ground.
However, the May 29 low at 1.3204 offered some support during Friday’s session. Given the tight range between 1.3200 and 1.3300, I’m not interested in trading the GBPUSD at the moment.
As long as 1.3300 holds as resistance on a daily closing basis (New York 5 pm EST) though, the pound is at risk of further losses. A close below the 1.3200 area would expose the October and November 2017 lows near 1.3040.
On Wednesday of last week, I wrote about how the GBPJPY was approaching a key inflection point. The intersection of former channel support from the 2017 low and the short-term trend line from the current 2018 low created a decision point for the pair.
However, I was more interested in a break lower than the opposite. Here’s what I wrote on Wednesday:
As long as the pair remains below former ascending channel support near 148.20 on a daily closing basis (New York close charts), I will stay bearish the GBPJPY. That said, I need to see more from sellers before I commit any capital to a position.
The GBPJPY did break lower on Thursday, but sellers had a difficult time pushing prices below 146.30. That said, as long as the pair remains below former channel support near 148.40, I will maintain a bearish bias.
Resistance for the week ahead comes in at 147.20/40. The area has served as a pivot for the pair over the last couple of weeks. A close below that 146.20 would re-expose the 144.00 daily support level.
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The AUDJPY has been consolidating since late March following an 850 pip slide between January 23 and March 23. At first glance, the last few months of price action looks unruly and even random.
However, that’s rarely the case, particularly for a relatively liquid pair like the AUDJPY.
There are two patterns taking shape here that appeal to me. In fact, the pair has some of the best technicals around at the moment, and that’s saying a lot.
First is the larger descending channel that has developed throughout 2018. The upper level extends from the January 23 high and connects with the recent June 7 high.
At the other end, channel support extends from the November 2017 lows and connects with the March 23 low from this year. It’s an equidistant channel (the levels run parallel), so there’s no need to use free-form trend lines to plot this one on your chart.
The second equidistant channel is a smaller ascending structure. When you zoom out a bit, this channel appears to be a bear flag, which is nothing more than counter-trend consolidation that carves a channel.
So, everything checks out. We have an established downtrend that began in January as well as counter-trend consolidation via the ascending channel in the chart below.
The only thing missing is a daily close (New York 5 pm EST) below ascending channel support. Such a close would signal a breakout and also confirm this bearish continuation pattern.
Should the above scenario play out, the objective for the AUDJPY would be a move to the 76.00 handle.
Yes, that is more than 600 pips below the current price and may sound unrealistic. However, I assure you the same level of doubt existed prior to the recent 850 pip drop that commenced in late January.
But make no mistake, a move of that magnitude will take weeks to play out. In fact, if this descending channel holds up, the pair wouldn’t reach the 76.00 area until sometime in late July.
All of the above, of course, assumes the technicals you see below play out accordingly. If the pair breaks any level on a daily closing basis other than ascending channel support, all bets are off.
I started building a short position during Thursday’s session which I discussed in the Daily Price Action member’s community. I plan to add to the position on a daily close below channel support.
Alternatively, a daily close above descending channel resistance would negate the idea entirely.
Following a 1,000 pip selloff between late April and early June, GBPAUD bulls were on a tear last week. Since the low on June 5, the pound cross has clawed back 450 of the 1,000 pips it lost recently.
However, buyers are fast approaching a level that could serve as a roadblock to further gains.
The 1.7940 level has served as a pivot since December of last year. More recently it attracted buyers on multiple occasions throughout May.
1.7940 is also the 50% retracement when measuring from the April high to the June low.
Given the bullish momentum of late, I won’t consider selling the GBPAUD without the presence of a valid sell signal. In other words, a bearish pin bar would need to develop at 1.7940 to pique my interest.
Key support for the week ahead comes in at 1.7720 followed by 1.7580.
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