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Despite boasting some of the best technical levels, the EURUSD was a tough one to trade last week.
The October 26 close below the 1.1670 handle was a significant development. Not only did it break the key support level, but it also confirmed what appeared to be a head and shoulders reversal.
However, Euro bulls had other plans. The November 14 rally took out stops above the 1.1670 area and went on to close the day 125 pips above the key level.
That too was a significant development. It signaled that sellers no longer had control, which had been the case since the September 8 bearish pin bar from 1.2040.
From here it’s anyone’s guess. I’m not ready to say that the EURUSD is back in rally mode nor am I bearish like I was at the start of last week. What I do know is that the 1.1670 area will likely attract bids if tested over the coming sessions.
Similarly, key resistance at 1.1875 will likely continue to attract sellers as it did during Wednesday’s session.
Some asked me whether or not the November 15 bearish pin bar is significant. I think it is but only as far as new support in the 1.1670/90 area. And because the region is just 100 pips below the current price, there is no setup in my opinion.
Furthermore, I tend to ignore candlestick patterns that fly in the face of large opposing candles as was the case between Tuesday and Wednesday.
I’m going to stay on the sideline until market participants decide on a direction for the single currency. Key support comes in at 1.1670/90 while resistance can be found at 1.1875.
GBPUSD bulls held onto ascending channel support once again last week. It’s a level that extends from the March low and will be instrumental in determining the path forward for the pound sterling.
To the upside we have a familiar resistance level. The 1.3290 area has held buyers in check since October 3. We’ve had intraday spikes above the level, but the pair has yet to manage a daily close above it since late September.
So we’re back to watching and waiting for the GBPUSD to make its move. As I mentioned a few weeks ago, the terminal pattern that has formed as a result of trend line resistance and channel support will be the deciding factor going forward.
Those two levels intersect at some point in December. So, sometime between now and then, the pair has a big decision to make. Either break above the 2014 trend line or below ascending channel support from the March low.
Either way, the outcome could offer one of the best opportunities of 2017. In fact, a breakout from the terminal pattern will likely have repercussions that extend well into 2018.
In the short-term, however, the GBPUSD is range bound between 1.3130/50 support and 1.3290 resistance. We can use these areas to watch for price action signals until the pair reaches the termination point.
On Wednesday of last week, I mentioned how the USDJPY was breaking below the 113.15 handle. It’s a level we’ve had on our radar for weeks and one that would indicate a turn lower if broken.
At the time, prices had plunged below 113.15, but the pair hadn’t yet closed the day below the level. However, just a few hours after Wednesday’s commentary, sellers secured a 112.85 close.
That set up a short opportunity on a retest of the 113.15 area as new resistance. For the price action trader, it was one of those ‘bread and butter’ types of setups.
A support turned resistance (or vice versa) level like this is one of the purest forms of trading price action. But make no mistake. It’s also one of the most lucrative ways to make money and in a relatively short period of time.
Those who went short could have placed their stop loss above the November 15 candle. With a 111.60 target, that’s a 3.8R setup. I should note, however, that the pair hasn’t hit the 111.60 objective just yet, though it does appear to be within reach this week.
Of course, a daily close below the 111.60 area would expose the next key support at 110.20. Alternatively, a bounce higher from 111.60 would likely encounter selling pressure near 113.15.
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We looked at the NZDUSD on Friday as the pair was trading below the key 0.6820 handle. It’s a level that dates back to May of this year and also provided some support in late October.
I know some of you went short on the November 9 retest of the confluence of resistance at 0.6980. It’s the intersection of three different levels as shown in the chart below.
If you’re still holding short, Friday’s close below the 0.6820 handle could offer an opportunity to add to the position. For others, it could provide a chance to get in for a move toward the next support at 0.6675.
However, keep in mind that the current price is getting a bit overextended as of Friday’s close. As such, I anticipate some consolidation below 0.6820 before prices continue south.
As long as 0.6820 holds as resistance on a daily closing basis, I’ll remain bearish the NZDUSD. Key support comes in at the May 2016 low at 0.6675.
The EURJPY is still on my watch list. We’ve been tracking the range between 131.80 and 134.40 for weeks now as buyers and sellers refuse to surrender.
As long as the 134.40 handle holds as resistance on a daily closing basis, I maintain the idea that a double top formed between September and October.
However, without a daily close below 131.80, we can’t technically call it a double top. That said, the constant pressure on support and the recent USDJPY breakdown does suggest a lower EURJPY over the coming sessions.
I’m going to hold off on considering an entry until we get that daily close (5 pm EST) below 131.80. If sellers can pull that off, there isn’t much to stop the pair from retesting the 129.30 area.
Alternatively, a daily close above the range top at 134.40 would expose the next resistance at 136.80.