The EURUSD rebounded higher last week forming a quasi-bullish rejection candle on the weekly chart. It started with Wednesday’s 130 pip surge and was capped off by Friday’s end of day bounce to stay above the trend line from the 2017 low.
The placement of that trend line is more subjective than most. If you connect it with the March low, you get a very different level than if you draw it from the 2017 low and connect it to the April low.
However, I think both placements have shown merit. The trend line below is connected to both the March and April lows, and if you watch the EURUSD on the intraday charts, you’ll notice that price is respecting the level nicely.
For the week ahead, the pair may continue to encounter selling pressure at 1.1720. This area has served as a pivot for the last few weeks. Key support comes in near that 2017 trend line at 1.1650.
Judging by the way the single currency reacted to both 1.1720 and 1.1650 last week, I do think there is evidence to suggest some near-term strength. It wouldn’t be surprising given that the pair is down nearly 1,000 pips since just before the April 20 breakdown.
A daily close (New York 5 pm EST) above 1.1720 would expose the next key resistance at 1.1830. Alternatively, a close below the 2017 trend line near 1.1650 would re-establish the downtrend and pave the way for a move to 1.1570.
On April 17 the GBPUSD started a new short-term trend that would take the pair lower by more than 1,000 pips. Just like the EURUSD above, the GBPUSD respected just about every level we’ve had our eye on for the last six weeks.
That includes the range break below 1.3460 on May 21, which also triggered the bearish pin bar on the 22nd.
However, one pin bar that didn’t fare so well is the one that formed last Thursday. Sellers did their part to close the May 31 session back below 1.3300 before the New York 5 pm close but were unable to do the same on Friday.
As such, any retest of the 1.3300 area this week could attract buyers. And if the level holds, we could see a move back to previous range support at 1.3460.
It’s going to take a daily close above 1.3460 to expose higher resistance levels including 1.3600 and 1.3760. For now, though, it appears we will likely see the GBPUSD trend higher this week to at least the 1.3460 handle.
On May 23 I wrote that I favored USDJPY shorts below 110.40. At the time, the pair was in the process of testing former ascending channel support as new resistance.
The next key support was 108.60, giving sellers a decent amount of real estate to work with. Within four trading days, the USDJPY had reached that first support at 108.60.
Fast forward to today, and we can see that the pair did, in fact, catch a bid at the 108.50/60 area last week. The long-tailed candles on Wednesday and Thursday signaled a turn higher was likely.
We now have conflicting signals on the weekly chart. Last week carved a bullish pin bar, yet the prior week was a bearish outside week.
However, so long as the price remains below the 110.00 handle on a daily closing basis (New York 5 pm EST), the pair remains vulnerable.
I’m going to stay on the sideline for now. If we get a retest of the 110.00 resistance area, I may entertain a short entry, but for now, I don’t see much to do here.
From a technical standpoint, the GBPJPY has the best long-term potential in my opinion. This is due to the May 23 close below ascending channel support at 147.50.
I mentioned this pattern on May 4 and again on the 25th. It’s also been part of just about every weekly forecast for the last six weeks. I even wrote a Q&A post on the breakdown which you can read here.
As you can see from the chart below, the pair caught a bid last week at the 144.00 handle. This is the level I illustrated as support in the last commentary on the 25th of May.
Based on Friday’s price action, it appears we may get that all-important retest of the 147.00 resistance area. When viewing the pair’s movement since October of last year, you’ll quickly notice how pivotal 147.00 has been over the previous eight months.
A sell signal from this area could offer a favorable opportunity to get short. However, there’s also a chance the market may need to tag former ascending channel support as new resistance. That would suggest a move north of 147.00.
All in all, I’m only interested in selling the GBPJPY as long as the price remains below former channel support on a daily closing basis at 5 pm EST. That said, I’ll need to see a retest of 147.00 (at minimum) followed by a sign that sellers remain in control.
We will no doubt continue to discuss this one inside the member’s area in the days and weeks to come.
Despite its recent bounce, the EURAUD is still down 270 pips from the May 16 commentary where I pointed out a possible change in trend.
At the time, the pair had broken below a trend line that extends from the 2017 low. Sellers had also breached the 1.5770 horizontal level during the same session.
Since that time the Euro cross has respected each horizontal level with precision. Following the close below 1.5618 which I also illustrated on May 16, the pair sold off after reaching a high of 15619 on the 23rd.
That decline on the 23rd of May also took out the 1.5480 handle. The New York close (5 pm EST) at 1.5467 was the deciding factor there.
You can see from the chart below how this 1.5480 level has served as resistance since late last week. The May 24 session rallied above the level intraday, but buyers failed to close the price above it.
On Friday, we can see how buyers once again struggled to gain traction above 1.5480. One thing to keep in mind, however, is that the pattern developed on a Friday when volume tends to be lighter, which may affect its reliability.
Key support comes in at 1.5340 with a daily close below that exposing the 1.5215 area. Key resistance for the week ahead remains 1.5480.