EURUSD played out nicely for us last week. Not only did the pair encounter selling pressure at the 1.1530 resistance level on Monday, but sellers also cleared 1.1430 by the end of Wednesday’s session.
Following that close, we were watching for a selling opportunity on a retest of 1.1430 as new resistance. The euro set up for us after reaching a session high of 1.1432 on Thursday before losing nearly 100 pips over the next 36 hours.
However, the single currency caught a bid on Friday before reaching our target at 1.1300. That isn’t to say the pair won’t continue lower this week though. Friday moves can be deceiving as many traders like to close positions before the weekend.
As long as 1.1430 holds as resistance on a daily closing basis (using the same New York close charts I use), the 1.1300 area will remain exposed.
Alternatively, a daily close back above 1.1430 would delay the bearish outlook and re-expose the 1.1530 handle.
Last weekend I pointed to the 1.3070 resistance level on the GBPUSD. Sellers had cleared the level on the 18th and appeared to have stood their ground on Friday the 19th.
Sure enough, the pound slid 300 pips last week. The pair caught a bid at 1.2940 during Tuesday’s session and even came close to retesting 1.3070 again as resistance.
But Tuesday’s rally didn’t last long and by Wednesday’s close sellers had taken out the 1.2940 support level. That break exposed 1.2800, a level I’ve had on my chart for several months now.
As you can see from the chart below, GBPUSD caught a slight bid at 1.2800 just before the weekend. Of course, whether buyers can capitalize on Friday’s bounce this week is yet to be seen.
What I do know is that the pound is once again carving lower highs and lower lows. If you require a second perspective to be sure, a view from the weekly time frame shows a relatively bearish trend with multiple rejection candles below 1.3300.
Keep in mind that the ongoing Brexit negotiations will continue to spur more volatility for the pound. If you insist on trading GBPUSD, it appears selling from resistance remains the most sensible approach.
I’ve been announcing my bearish view of USDJPY for the better part of October. My first comments came on October 9th when I wrote that “USDJPY looks ready to collapse”.
Not exactly a subtle title, I know. But I had my reasons including the way buyers were struggling to extend rallies as well as the aggressive selloff that began on October 4th. Mind you USDJPY was still trading above 113.00 at the time.
Then came the retest of the 112.00 support area. However, while I suspected the pair might catch a bid here, I had no intention of buying. In fact, I even stated that I was “cautiously bearish”.
The way last week’s price action started to weigh on trend line support at 112.00 was all I needed to open a small short position just below 112.70. We discussed the “heavy” price action at length in the member’s area every day last week.
Finally, after nine days of leaning on trend line support, sellers forced a break with Friday’s close. Given that the trend line below extends from the current 2018 low and has been in place for seven months, Friday’s move was a significant one in my opinion.
My only reservation is that the breakdown occurred on a Friday. Since volume tends to dry up before the weekend, Friday breakouts can be less reliable than those that occur mid week.
Still, I will remain short here so long as USDJPY trades below the 112.00/40 resistance area on a daily closing basis. As I’ve mentioned all month, last week’s breakdown exposes 110.80 support with a close below that paving the way to 109.80.
Alternatively, a daily close back above the year-to-date trend line (currently near 112.20) would negate the bearish outlook.
NZDJPY is an excellent example of how we can use a few simple horizontal levels to our advantage.
Since mid-August, the risk-sensitive pair has been bouncing from the 72.35 support area. And since the July 2017 high, NZDJPY has been trending lower with a series of lower highs and lower lows.
That means these repeated retests of 72.35 support are either the beginnings of a bottom or the start of the next leg lower.
If you had asked me in September, I would have leaned toward the bottoming theory. However, a couple of things have happened in October to make me question that approach and even suspect an imminent breakdown.
First, NZDJPY carved a lower high last week. In fact, Thursday was the only positive day for the pair. That 200-pip slide last week is enough to make me question how much longer buyers can hold onto 72.35.
Second, USDJPY broke the 2018 trend line support last week (see chart above). That may seem irrelevant to NZDJPY, but I assure you it’s worth noting. The USDJPY is a benchmark for risk appetite, so a breakdown like Friday’s often spills over into the yen crosses.
It’s going to take a daily close (New York 5 pm EST) below 72.35 to open up the next leg lower. If and when the pair clears this level, I have every reason to suspect a 300+ pip decline to the 69.20 area.
You’ll note that the range between 72.35 and 75.50 is also just over 300 pips. That’s no coincidence as markets like to traverse the same distance of a prior range following a breakout.
Furthermore, 69.20 is the 2016 low. It may vary depending on your broker, but I’ve checked with three of the largest Forex brokers, and the consensus points to somewhere between 69.14 and 69.23. That’s good enough for me.
The last time I mentioned gold (XAUUSD) was in the October 14th weekly forecast. Buyers were coming off an impressive Thursday rally that put the market above trend line resistance that extends from the April high.
That rally also cleared the 1215 horizontal level. Notice how this area served as a pivot between mid-July and August.
Following that break above 1215, we were watching for a retest of the area as new support. The market didn’t give us much but did manage to catch a bid from the support area on Monday the 15th.
As for resistance, we were keeping a close eye on the 1235 area. Similar to 1215, the 1235 area served as a pivot earlier this year and is also the December 2017 low.
You can see how several sessions last week encountered selling pressure in the 1235 region. Friday even carved a bearish rejection candle that could hint at a pullback early this week.
However, while we may see a brief hiatus in the recent buying pressure, I see nothing here to make me think gold bulls are finished. In my opinion, gold remains a buy while above 1215 support.