After slipping lower to the start the week, the EURUSD finished just above where it opened on Monday at 1.2316.
However, despite the last 48 hours of gains last week, the single currency remains capped by the 1.2330 handle. I would argue that this area extends toward the February 21 to 26 highs at 1.2355.
As long as this area between 1.2330 and 1.2355 holds as resistance on a daily closing basis (using a New York close chart), the pair remains vulnerable.
We can also see from Thursday’s price action how the pair found support at 1.2160. I commented on this level last Sunday as one that could attract an influx of buying pressure.
But as I mentioned last weekend, I suspect this congestion will continue until one of the longer-term trend lines (blue lines below) breaks. Until that occurs, the story will continue to be a lot of back and forth price action.
This week’s direction could hinge on the outcome of the Italian elections. The results of the vote, which are expected early on Monday, will likely trigger an increase in volatility for the Euro. As such, take extra care if you plan on trading the Euro in the first 24 hours of the week.
In the absence of bullish or bearish price action, I will stand aside until the pair breaks the April 2017 trend line support or 2008 trend line resistance.
Last week’s GBPUSD weakness worked out nicely for us. Monday’s retest of descending channel resistance at 1.4070 presented a favorable opportunity to get short.
I entered at 1.4058 and added to the position following Tuesday’s close below ascending channel support at 1.3905.
I decided to close my entire short position during the second half of Thursday’s session at 1.3750. I viewed Friday’s speeches by the BOE’s Governor Carney and Prime Minister May as possible disruptors to the downward momentum.
However, I am interested in getting back in as I’m not convinced that the retracement that began in late January has run its course. My original target here was 1.3600, which has yet to come under fire as new support.
As such, I’m keeping the 1.3860 area on my radar. The level served as support in early February and more recently on the 22nd and 27th.
It’s also the 23.6% Fibonacci retracement from the January 25 high to yesterday’s low, and very near the 38.2% retracement of last week’s range.
There’s no guarantee the pair will get back to 1.3860 before retesting the 1.3600 handle. If it doesn’t, that’s okay. I made a good bit of money from last week’s move, and there are always opportunities developing elsewhere.
I also don’t want to chase because although the GBPUSD is near its weekly mean, the daily time frame is currently trading 120 pips below the 10 and 20 EMAs. That alone suggests we could see the pair consolidate a while longer before the next push lower.
In summary, I’m going to keep a close eye on 1.3860 this week. As long as this level holds on a daily closing basis (using New York close charts), the 1.3600 level remains exposed. A close above 1.3860 would set our sights on descending channel resistance near 1.3950.
On February 23 I wrote that the 131.40 area on the EURJPY holds the key to the next 300 pip move.
That Friday close wasn’t convincing enough. A late-session buying spree on February 23 left us with a final print of 131.36, which was too close to call it a break.
However, the price action between Tuesday and Wednesday of last week seems to have found the answer. Friday’s close leaves no doubt that former range support at 131.30/40 should now serve as resistance.
This creates the ideal scenario for those looking to short the EURJPY this week. A rotation higher into 131.30/40 followed by bearish price action could present a favorable opportunity to get short.
Key support for the week ahead comes in at 128.30. Keep in mind that last week’s low of 129.55 could also attract a few bids on the way down.
There is also reason to believe that the 147.90 area is significant given the May and July highs as well as the October and November lows from last year.
Sellers didn’t waste much time following through on Wednesday’s breakdown. Thursday’s session encountered selling pressure right where we’d expect, and Friday’s close was also right on the mark.
145.85 is the support level I discussed in Thursday’s post. Unsurprisingly, Friday closed at 145.86, suggesting that we could see a bounce to start the week.
However, seeing as how the GBPJPY broke below the 2016 trend line last week (see the March 1 commentary), I continue to favor selling strength. The same goes for the other yen crosses mentioned in today’s post.
For the week ahead, the 147.00/90 area will serve as resistance with key support coming in at 145.85. A daily close (New York 5 pm EST) below 145.85 would expose 144.00 and perhaps 141.40.
It took a few weeks, but the AUDJPY hit my target at 81.50 last week. I first mentioned the idea of going short here on January 29 when the pair was trading 600 pips higher at 88.15.
The sub 87.20 close on February 5 opened the door to the next support at 85.40. Despite bouncing from this area, I was only interested in shorting a close below it.
Here’s what I wrote on February 6:
Instead of buying prices above 85.40, I’m only interested in shorting a daily close (New York 5 pm EST) below it. And if we do get a retest of 87.20 as new resistance, I’ll view it as a potential selling opportunity.
My target on a daily close below 85.40 is the 2017 low at 81.50.
Now that the AUDJPY has reached the 81.50 support area, I suspect we’ll see some near-term strength. That said, like the other yen crosses, I’m still only interested in selling retests of new resistance.
As for the AUDJPY, that means a return to the 83.30 area. The horizontal level served as support on February 14 and 23 before closing below it last Wednesday.
The intersection of 83.30 and former descending channel support creates an attractive area to watch for selling opportunities. Only a daily close back above this area would negate the bearish outlook.
Key support for the week comes in at 81.50/60 followed by 79.80.