Daily Price Action

Recap of This Week’s Trades, Breaks and Other Forex Price Action


weekly forex recapThis week has given us more favorable price action than the previous four weeks combined. As such, I wanted to run through some of the commentary that has been published thus far. This will include confirmed trade setups as well as potential setups that remain on our watch list.

The recap below will not take the place of the weekend commentary, which as always will be out on Sunday shortly after the market opens. You will want to tune in for that as I have a new price structure to discuss that could offer an extremely favorable opportunity next week. More on that this weekend.

EURUSD has been on our watch list for a long time! The ascending channel that began forming back in March certainly took its time to unfold, which isn’t surprising given the 3,500 pip tumble that began at the beginning of May of last year.

Generally speaking, the longer and more substantial a move is, the longer the resulting period of consolidation is likely to be. The same holds true the other way around. The longer a market consolidates, the more volatile the resulting breakout is likely to be.

Back to the price action of late…

Last week’s break of channel support put the focus back on parity for the first time since February. But at nearly 1,000 pips from current levels, parity is still a long way off.

That said, I do like EURUSD lower given the recent break of support combined with the retest as new resistance early this week. Tuesday and Wednesday’s sessions put decent pressure on the former support level, however the bears held their ground, indicating that last week’s break has conviction behind it.

From here the first level of key support comes in at the May and July lows near 1.0820. Below that we have some minor support at 1.0658 with a much more significant zone of support at the multi-year low at 1.0470.

As for the bigger picture, we first have to get through the 2015 low and the infamous parity before that analysis can start to look more like an end-game scenario.

Note: I am still short EURUSD from 1.1040 with an initial target of 1.0820. 

Summary: Watch for selling opportunities while below former channel support on a closing basis. Looking lower, key support can be found at 1.0820, 1.0658 and the multi-year low at 1.0470. Alternatively, a daily close above former channel support would negate the bearish bias in the short-term.

EURUSD break below channel support on the daily chart

GBPUSD continues to send mixed signals. The pair recently broke below a 4 hour trend line, which indicated weakness going into Wednesday’s session. The following FOMC statement helped to provide an additional push lower.

However, today’s session has completed blown that idea out of the water.

Or has it?

Remember that nothing is confirmed until the day/week closes. That said, it would take one heck of a push by sellers to move the pair 60+ pips lower before the close.

Regardless of how today’s session ends, GBPUSD is not one of my favorite pairs to trade at the moment. In fact it hasn’t been for quite some time. I think there are better opportunities out there to include the EURUSD price action we just discussed.

Summary: Standing aside for now until a more favorable opportunity presents itself. A close above the 1.5345 handle would turn our attention higher for next week, while a close below would expose key support at 1.5110.

Technical break on the GBPUSD daily chart

USDCHF completed one of the best looking wedge patterns I have seen in a long time this past week. After ten months of consolidation following the momentous Swiss National Bank intervention in January, the pair broke wedge resistance on October 26th.

Since that time the pair has trended higher, gaining 70 pips since the close.

With that break of resistance in mind, the idea was to watch for an opportunity to get long. While the pair has moved higher since the break, there hasn’t been any price action worth trading, at least not on the daily time frame.

As the pair continues to rotate lower, traders can watch for a retest of former wedge resistance as new support. Any bullish price action from this level next week could offer a chance to enter long.

Summary: Watch for bullish price action on a retest of former wedge resistance as new support. Key resistance comes in at the multi-year high of 1.0240. Alternatively, a close below former wedge resistance would negate the bullish bias and turn our attention lower.

USDCHF break of wedge resistance

NZDUSD just recently made my watch list, although recent price action suggests that it may be some time before we get anything favorable out of the kiwi.

Update: A look at the current 4 hour chart shows a retest of the level mentioned below. 

On the 4 hour chart, we can see that the pair was recently consolidating in a wedge pattern. That price structure broke down on October 28th, ahead of the FOMC statement.

NZDUSD wedge on the 4 hour chart

Strength from the US dollar following the FOMC statement helped push the pair lower. However a strong bid formed at the 0.6630 handle, which I mentioned here.

There are two ways to play this moving forward. The first would be to watch for bearish price action on a retest of former wedge support. Such a combination could offer a favorable opportunity to get short.

However, what catches my attention more than the 4 hour wedge is the trend line that extends off of the July 10th high. This level was previously tested as resistance on two separate occasions and as expected, acted as support between October 13th and 14th.

Although the pair has maintained positive ground since the 8th of October, I’m only interested in a break back below the level. The recent move below wedge support tells me that the bulls are lacking conviction, a sentiment that could very well send this back through the four-month trend line in the coming weeks.

Summary: Watch for bearish price action on a retest of former wedge support as new resistance or watch for a selling opportunity on a close below the trend line off of the July 10th high.

NZDUSD trend line on the daily chart

Last but not least is AUDCAD, a pair that may have just broken free from this ascending channel on the daily chart. I mentioned this pattern during Wednesday’s session when the pair was 130 pips higher than it is now.

Although yesterday’s close appeared to have cleared the channel floor, it was too close to call. With this in mind, we can watch to see how today closes in order to determine if indeed it was a clean break.

I don’t trade AUDCAD very often, however this well-defined channel certainly caught my attention. Combine that with the pattern’s measured objective, which lines up perfectly with the 0.8985 handle, a level that I have been watching for several months now, and we may just have enough to make a case for an entry next week.

While the objective lining up with a key support level could just be a coincidence, the fact that we have this kind of confluence leads me to believe that a 330 pip move to this area is a likely scenario. That said, only a daily close below support would confirm the pattern and set up an opportunity to get short next week.

Summary: Watch for a selling opportunity on a daily close below channel support. Below there, key support comes in at 0.9170 and 0.8985. Alternatively, a close above support would leave us on the sidelines until a favorable opportunity presents itself.

AUDCAD ascending channel on the daily chart

Leave a Comment:

Fahad Ramadhan says

Isn’t that an inverted head and shoulder pattern on GBPUSD daily chart??

    Justin Bennett says

    Fahad, could be. It all depends on how the market interprets it.

Justin Bennett says

Solomon, you’re welcome and thank you for the feedback.

Justin Bennett says

Solomon, while it can be a volatile cross to trade, that is a decision you need to make for yourself. I personally have traded several yen crosses this year and will continue to do so.

Add Your Reply