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The EURUSD lost ground for the second week in a row. This was the likely scenario given the September 25th close below long-term channel support near 1.1900.
Another probability that we discussed last week was that the 1.1670 area would attract bids if tested. It’s the August low and a level that served as a pivot between the 21st and 28th of July.
Friday’s low of 1.1669 followed by a 60 pip bounce is no coincidence. The 1.1670 handle did indeed attract buyers ahead of the weekend.
But despite Friday’s rebound, I don’t see this as a buying opportunity. While the single currency may claw back some of its recent losses, last month’s break of the six-month ascending channel was a significant development in my opinion.
The situation is similar to what happened with the AUDUSD at 0.7820. I cautioned some to think twice about buying the October 3rd bullish pin bar due to the recent shift in momentum. We could see a similar outcome here.
But we’ll talk more about the Australian dollar in a moment. As for the EURUSD, I closed my short position on Friday just above the 1.1670 support level. My initial entry was a few pips above 1.2040 just before the completion of the September 8th bearish pin bar.
I’ll be interested in shorting the pair again should buyers take prices back to the 1.1840/75 area. Otherwise, a daily close below 1.1670 would pave the way for a trip toward 1.1490.
The GBPUSD is starting to look much more appealing than it did earlier this year. We now have a structure in the form of an ascending channel that could offer clues about the pair’s likely path forward.
Last week’s price action played out in textbook fashion. In the October 1st weekly forecast I mentioned that the pair was at risk of further losses as long as 1.3250 held on a daily closing basis.
Buyers never even got close to taking out 1.3250 last week. Instead, sellers closed the GBPUSD sharply lower on Monday. Then on Tuesday, we got a daily close below 1.3250, another level in last week’s forecast.
Wednesday’s bearish (continuation) pin bar exposed a level we’ve had on our radar for some time at 1.3020. The area is near ascending channel support that extends from the March low.
For the week ahead this becomes a range play. That said, I’m not overly confident that buyers will manage a retest of 1.3250 resistance given how they’ve struggled in recent sessions.
The larger and perhaps more advantageous development for traders would be a daily close below the 1.3020 area. Such a breakdown would open the door to an extended move lower starting with the August low at 1.2770.
AUDUSD bears took the pair lower last week, forcing a retest of key support at 0.7730. I’ve been showing this level for several weeks. Friday’s rebound from 0.7732 validates the significance of this support area.
I was asked last week by more than one trader why I didn’t suggest buying the October 3rd bullish pin bar from 0.7820 support. You can see some of this discussion in last week’s comments here.
There was nothing wrong with the pin bar itself. However, the recent shift in momentum suggested that a seat on the sideline was the best option.
I often write about the significance of swing highs and lows. In fact, paying attention to swing points can tell you everything you need to know about whether buyers or sellers are in control.
Note how the AUDUSD had been carving higher lows on the daily chart since the May low at 0.7330. That pattern ended shortly after the September 21st close below trend line support.
That break was our signal that momentum was beginning to shift the other way. With that in mind, the October 3rd bullish pin bar was not in agreement with the recently established bearish sentiment. Even the October 3rd low took out the last major swing low in mid-August.
As for the week ahead, the plan is straightforward. A retest of the 0.7820 area as new resistance could offer a favorable opportunity to get short. Key support comes in at 0.7730 followed by the 0.7635 area.
Alternatively, a daily close (5 pm EST) back above the 0.7820 handle would negate the idea to go short and expose resistance at 0.7955.
We took an in-depth look at the EURGBP on Thursday of last week. In that post, I commented on the uptrend that has been in place since mid-2015. I also pointed out how buyers have struggled to carve proportionally higher highs.
The conclusion we can draw from Thursday’s analysis is that the EURGBP is still (technically) bullish but buyers are tiring.
That said, I’m in no hurry to sell the EURGBP. As of Friday’s close, buyers are in control so I see no reason to get short just yet.
Bearish price action from the 0.8980 resistance area could change that, of course. A move lower from current levels would likely encounter an influx of buying pressure at 0.8744 followed by the 0.8600 area.
Alternatively, a daily close (5 pm EST) above 0.8980 would suggest that bulls have other plans. It would force me to abandon the idea of selling the pair, at least in the near-term.
On Friday I mentioned that the EURJPY was at risk of pulling back following a break of key support. The level of focus extends from the April low and appears to be part of a six-month rising wedge pattern.
Shortly after I released that commentary, buyers took prices back above the level. But as you may well know, I don’t pay much attention to intraday moves.
It’s a good thing too considering the pair closed back below former wedge support near 132.30. In fact, the yen cross lost nearly 70 pips in the final seven hours of Friday’s session.
The bearish rejection from the former support area looks promising for those interested in selling the pair. However, do note that Thursday’s low at 131.84 could attract a few bids early this week.
As such, a more prudent approach might be to wait for a daily close (5 pm EST) below 131.84 before considering a short entry. If this occurs, there isn’t much to prevent a retest of the confluence of support at 128.40.
Alternatively, a daily close back above former wedge support near 132.70 would negate the bearish forecast.