EURUSD bulls clung to the 1.1875 area once again last week. The level capped the advance in early August until buyers were able to break through on the 25th of last month. Since that time 1.1875 has attracted bids on August 31st and again on Thursday of last week.
Although the uptrend is technically still intact, the momentum seems to be fading. Euro bulls have struggled to carve higher highs in recent weeks, and 1.1875 support has been a magnet for price action.
With the way things are currently progressing, we could see a third retest of the 1.1875 handle as early as this week. Buyers will likely make another stand especially considering channel support which lies just below 1.1875.
However, I’m not interested in buying here. I remain short based on the failed attempt to break 1.2040 on September 8th. If sellers do secure a daily close (5 pm EST) below the confluence of support at 1.1875, I will look to add to the position.
The only thing that would convince me that buyers are not tiring would be a daily close above the 2012 low at 1.2040. Until that time, I will maintain the idea that bullish momentum is slowing and a pullback is in order.
A daily close below the 1.1875 area would expose the August low at 1.1670. A close below that would pave the way for a move toward 1.1490 and perhaps 1.1300.
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The GBPUSD is approaching a long-term trend line that could pose a problem for buyers. The level that extends from the 2014 high will no doubt attract sellers over the coming weeks.
With that said, due to the extreme levels of volatility during the June 2016 Brexit, the exact location of this resistance area is difficult to pinpoint. The June 24, 2016 high could vary quite a bit from broker to broker, causing the precise location of this trend line to fluctuate.
There is also nothing to indicate that buyers are tiring. Last week’s 400-pip rally was the largest year to date, so attempting to sell the pair at current levels isn’t a wise decision in my opinion.
A better approach might be to wait for a retest of the 1.3600/50 resistance area. Because the area is difficult to pinpoint, waiting for bearish price action before further consideration seems prudent.
Key support for the week ahead comes in at 1.3445. This is the September 2016 high and is an area that also capped several advances in June and July of last year following the post-Brexit selloff.
The USDJPY, along with several other yen pairs, has been a tough one to trade in recent weeks. A look at the daily chart below shows just how back and forth the price action has been.
However, the September 8th false break of 108.25 support coupled with last week’s advance does look promising for bulls. On Friday we saw first-hand the two levels of focus for the week ahead.
The 110.90 handle has been instrumental since February of last year. More recently, it has acted as a pivot of sorts since being tested as support on July 24th of this year.
It’s going to take a daily close (5 pm EST) above 110.90 to keep last week’s rally alive. A close above the level would expose the next key resistance at 111.90 and perhaps 113.15.
A move lower this week would likely encounter buyers at 109.50. Given the combination of bullish factors mentioned above, I’m only interested in buying opportunities at the moment. Only a daily close back below 109.85 would challenge the bullish outlook.
Last weekend we discussed the September 8th bearish pin bar that formed on the AUDUSD. The candlestick pattern formed as a result of a failed attempt to crack the 0.8065 resistance level and signaled that a move lower was likely.
Last week’s price action didn’t disappoint. While it wasn’t an aggressive move lower by any means, the pair did lose ground and also came close to retesting a key support level that extends from the June lows.
Just like the EURUSD above, this AUDUSD uptrend looks like it might be in trouble. Of course, I could be wrong, but as long as the pair continues to pressure support near 0.7970/80 and remains below 0.8065 resistance on a daily closing basis, the odds of a reversal remain high.
For those who are already short based on the Friday pin bar, a daily close (5 pm EST) below this trend line near 0.7970 could offer a chance to add to your position. It could also provide a favorable selling opportunity to those who are still on the sideline.
A daily close below this trend line support would expose the August low at 0.7820. A close below that would pave the way for a move toward 0.7730 and perhaps 0.7635.
Alternatively, a daily close above the 0.8065 handle would negate the somewhat bearish outlook and expose the September 8th high of 0.8124.
The EURGBP was one of my top trade ideas for last week. We first discussed the retest of channel resistance on August 28th. The bearish rejection candle on the 29th signaled that buyers were exhausted and a move lower was likely.
We reviewed the Euro cross again in the previous forecast when the pair was trading at 0.9115. However, the best indication of an imminent selloff came with Tuesday’s close below channel support.
By 5 pm EST, sellers had secured a 0.9008 close, which was well below our key level at 0.9040. This left us watching for selling opportunities from the 0.9040 area for a move toward 0.8920 and perhaps 0.8780.
Both Wednesday and Thursday of last week encountered selling pressure in the 0.9040 region. The former reached a high of 0.9038 while the latter stretched a few pips higher toward 0.9042.
As you can see from the chart below, buyers didn’t put up much of a fight at 0.8925. Instead, the pair closed well below the area and continued its decline until bulls finally found some relief on Friday at 0.8780.
Last week’s aggressive selloff leaves the EURGBP overextended, particularly when we compare today’s price with the 10 and 20 EMAs in the chart below.
With this in mind, a bounce from the 0.8780 area early in the week would not be a surprise. In fact, I’ll be keeping an eye on this level for a second opportunity to get short.
A daily close below the 0.8780 handle over the coming weeks would expose the next key support at 0.8600. A close below that would target the unfilled gap from April 21st at 0.8369.
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