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One of the more notable events this past week in the Forex market was the way the Pound sold off to end the week. But will this momentum continue? I think that depends on the pair.
One such pair that sold off sharply after being rejected by support-turned-resistance was GBPCAD. The pair had been trading within a channel for the majority of the year before breaking down in early September.
The pair was rejected on Friday by former channel support and formed a bearish pin bar / outside bar combo in the process. But here’s the caveat. The market closed at the September 16th and 17th lows. The 4 hour chart gives a better vantage point.
Because of this I do think that we may see some form of a rally early next week. The extent of that rally is anyone’s guess, but I’d like to see 1.80 hold if the market can make it there.
Summary: Watch for a possible rally back to the 1.80 area and look for bearish price action. The next key support comes in at the September 8th low of 1.753.
Next up is GBPJPY. Although this pair also sold off sharply to end the week – forming a bearish pin bar – I’m not looking to short this market. The bullish momentum lately has been impressive. In fact the pair made a new six-year high just this past week.
The 175.40 level was the previous six-year high made on July 3rd and 4th, so naturally we would want to look for bullish price action on a possible retest of this area. This level also intersects with a former trend line from February of this year.
Summary: Watch for bullish price action on a possible retest of resistance-turned-support in the 175.40 area. Key resistance would come back in at the 179 area. If the market can break that level, there isn’t much in the way until 184.
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