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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.
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On Friday, I explained how the EURUSD has been indecisive but technically sound. In other words, there’s no clear directional bias, but the pair is respecting support and resistance areas.
In last Sunday’s forecast, I pointed out support at 1.1530. I also highlighted the 1.1640/50 resistance area. You can see from the chart below how the Euro respected both areas last week.
Friday’s session brought the single currency back to 1.1550, just 20 pips above 1.1530 support. As such, I wouldn’t be surprised to see an early retest of 1.1530 this week.
But just as I mentioned on Friday, it’s going to take a daily close below 1.1530 to expose downside targets including 1.1300. Until that happens, the EURUSD will remain range-bound between 1.1530 and 1.1630.
Keep in mind that I use New York close charts so that each 24-hour session closes at 5 pm EST. Click here to get access to the same charts I use on this website.
I remain short from the August 31st session at 1.1642. I will be interested in adding to the position following a daily close below 1.1530.
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Friday’s bearish pin bar suggests the GBPUSD could come under further selling pressure this week. The descending channel that has been in place for several months is what attracted sellers before the weekend.
In addition to channel resistance, the pound also retested the recent highs at 1.3040. I mentioned this level in last Sunday’s forecast.
We may see the pair gain some ground early this week, but I’d suspect sellers to be camped out between 1.2960 and 1.2980. That could present a favorable selling opportunity for a move back to key support at 1.2800.
A daily close (New York 5 pm EST) below 1.2800 would expose the year to date low at 1.2660. Alternatively, a daily close above descending channel resistance near 1.2980 would negate the bearish bias and expose 1.3040.
I will remain bearish the GBPUSD so long as this channel remains intact on a daily closing basis.
Last week was more of the same from the USDJPY. As soon as buyers gain a foothold and push prices higher, they’re forced to retreat.
This back and forth price action has plagued the risk-sensitive pair for the majority of 2018. It’s the reason I haven’t traded it for quite some time.
But I also know it’s a popular choice for many traders, so I’ll do my best to interpret what’s happening here. However, I still think you’d be better off going with any of the other currency pairs in today’s post.
I mentioned what appeared to be a falling wedge on August 23rd. Not long after that post, buyers closed the pair well above resistance.
Since that time though, USDJPY bulls have struggled to gain any meaningful ground. It seems the 111.70 area is attracting quite a lot of selling pressure.
On the other end, buyers continue to come to the rescue as soon as prices dip near former wedge resistance. We saw it happen on August 31st and again on Friday.
There is also a trend line support that extends from the year to date low that appears to have come into play just before the weekend. Note how the pair caught a bid from this level on Friday.
Now to play devil’s advocate for a moment. The USDJPY has been terrible at respecting trend lines for most of the year. If you’ve been trying to trade the pair based on trend line breaks in 2018, you know what I mean.
So take any break of the trend line below with a grain of salt. In fact, take extra care when pursuing any breakout here. The pair remains incredibly indecisive and difficult to interpret when compared to some of the other more favorable currency pairs.
Last week the USDCAD completed what appears to be a bull flag pattern. I discussed it last Sunday and again on Tuesday.
So far, the pair is holding above former channel resistance which should now serve as support. That level comes in near 1.3050.
However, Thursday’s bearish engulfing range indicates that we could see further weakness before the next leg up. There are no guarantees, but a recent bout of Canadian dollar strength could put pressure on USDCAD bulls this week.
The best course of action, in my opinion, is to stay patient. The pair is still hovering well above the 10 and 20 daily EMAs suggesting that prices remain stretched following last Tuesday’s rally.
As long as the USDCAD trades above former channel resistance (new support), the potential for further gains seems likely. Key resistance comes in at 1.3385 with a minor area near 1.3270.
Alternatively, a daily close back inside the descending channel would negate the bullish idea.
The AUDUSD spent most of last week consolidating above the confluence of support at 0.7160. I wrote about this area on Thursday and explained why it’s so important.
However, sellers decided to change things up on Friday, closing the pair nearly 60 pips below the key support level.
Here’s where things get tricky though. I’ve mentioned in the past how a downside break of a descending pattern is not ideal. Think of what happened to the GBPUSD in August.
That said, there is a chance that the AUDUSD price action since May has formed a descending channel rather than a wedge. See the chart below.
If that’s the case, the 0.7140/60 area could serve as resistance moving forward. It would also expose the 0.7000 handle and perhaps even the 0.6840 region I mentioned previously; it all depends on how quickly the latest breakdown unfolds.
Given that Friday closed well over 100 pips from the 10 and 20 daily EMAs, a retracement this week seems likely, and bearish price action from 0.7140/60 could present a selling opportunity.
Just know that Friday’s breakdown could be a bear trap, so reducing your position size may not be a bad idea. And if the AUDUSD closes the day (using a New York close chart) back above 0.7160, it would negate the bearish outlook for the time being.
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