EURUSD continued its slide last week after a strong NFP figure pushed the pair below my first target at 1.0820. However I don’t think that the bears are done just yet.
If the market does indeed treat this price structure as a larger bear flag pattern off of the 2014 high, we could be looking at a move toward the 2000 low at 0.8225 over the next couple years.
In the shorter-term, the pair remains bearish while below 1.0820 on a closing basis. Above that would target former channel support near 1.1100. The next key support levels come in at 1.0658 and 1.0470.
GBPUSD continues to stump market participants. Just when the crowd turns bullish, it turns bearish and vice versa. That said, something about last week’s move is different.
The most obvious difference is follow-through. The dovish remarks that came out of last Thursday’s BoE report put a major damper on those who maintained a bullish conviction going into the event.
Last week’s price action also helped to clear up the debate as to whether the price structure since September was an inverse head and shoulders pattern. I certainly had my doubts and it appears that the market shared that skepticism.
Although it took a bit more time to materialize than I originally thought it might, the pattern of lower highs and lower lows does seem to still be playing out.
My bearish bias will remain intact as long as the pair remains below 1.5110 on a closing basis. Key support comes in at 1.4980 and 1.4740.
USDJPY is certainly one to watch this week. After spending more than two months consolidating below the 121.80 handle, the most liquid yen pair gained 150 pips during Friday’s session thanks to a very healthy jobs number.
This was a big move for a currency pair that is lucky to see 100 pips from a single session. But the most important question for the coming week remains…
Does USDJPY have enough fuel left in the tank to surpass recent multi-year highs?
Only time will tell, but Friday’s rally is bound to draw a lot of bullish attention. This could spell disaster for the bulls given the heavy resistance zone that lies just above current prices.
Of course a close above this area would all but guarantee new 2015 highs, while a rejection from it would likely mean a revisit to resistance turned support at 121.50.
NZDUSD made a significant break before the weekend. The 100-pip move was triggered by a strong NFP figure, the same catalyst that contributed to the Euro’s slide below key support.
I mentioned the potential for this move on Thursday, noting that a close below the trend line that extends off of the July 10th high could extend losses in the coming sessions.
With the pair now firmly below this level, that potential stands a much greater chance of materializing in the week ahead. That said, a retest of former support as new resistance would be needed in order to secure a favorable risk to reward ratio.
To the downside, the September high at 0.6455 will likely provide some support if tested. Below that would target the multi-year lows near 0.6240.
GBPJPY hit a roadblock last week during the pair’s churn higher that began in early October. As anticipated, that roadblock came in at the 187.25 handle, a level I had mentioned on Monday of last week.
With the pair back to the 184.20 support level, it’s clearly time to buy, right?
Not so fast. Although the yen cross did find a bid at this level during Friday’s session, the bulls that are left standing have yet to prove their worth.
My gut tells me that last week wasn’t the last of the selling pressure. Thursday’s bearish engulfing pattern might just trigger a retest of the thirteen-month trend line in the days and weeks ahead.
Only a daily close above 187.25 would negate this idea, while a move below 184.20 would help to confirm the idea that the bears are slowly starting to tip the scale in their favor.