I discussed the EURUSD twice last week. The first was on August 28th where I took a relatively bullish view. I even wrote that the pair could reach 1.1830 under the right circumstances.
Just two days later on the 30th, I did a 180-degree turn. Instead of examining the Euro through a bullish lense, I noted how the single currency would be at risk if it closed below 1.1650.
This sudden change in bias caused some readers to get upset. I even received a few emails from some rather heated individuals who didn’t like the fact that I changed my outlook so suddenly.
Let me be very clear by saying that loyalty to a position or directional bias is bad. In fact, it can be detrimental to your chance of succeeding as a Forex trader.
You have to be able to pivot quickly in this business. And if you can’t or won’t, you will get run over by those who can. It’s really that simple.
Just because you’re bullish on a market today doesn’t mean you need to stay that way until tomorrow or even one hour from now. If the market tells you it’s time to accept an opposing view, then that’s what you should do, no questions asked.
As for the EURUSD, Thursday’s bearish engulfing range caused me to question my earlier post about a 1.1830 target. You’ll notice that by the time I released the second EURUSD post on the 30th, the pair had already carved that engulfing range.
Based on Friday’s selloff, I’m glad I pivoted so quickly. I exited my long position near breakeven and even took a small short position at 1.1642. I may add to it, but only if sellers manage a daily close (New York 5 pm EST) below 1.1530.
So for the week ahead, any retest of the 1.1640/50 resistance area will likely introduce an influx of selling pressure. On the flip side, a retest of 1.1530 support will likely encounter an increase in buying pressure.
Following what appears to be a false break below descending channel support last month, the GBPUSD managed to gain 250 pips at last week’s high. Some late-week selling erased a portion of those gains, but the pair still finished the week higher.
That said, the downtrend that began in mid-April is still intact. The pound continues to carve lower lows and lower highs against the dollar.
It’s going to take a daily close (New York 5 pm EST) above descending channel resistance near 1.3040 to reverse that trend. Until that occurs, the GBPUSD will be susceptible to selling pressure.
Key support for the week ahead comes in at 1.2800 followed by descending channel support.
All in all, I’m bearish the GBPUSD for now. It’s going to take a daily close above the 1.3040 resistance area to begin to change that.
Last week I pointed out a support area on the USDJPY that stretches from 110.80 to 111.00. Although Friday’s session pierced below 110.80, the pair didn’t stay there for long.
Friday’s long lower wick suggests an increase in demand below the 111.00 handle. And as long as the pair stays above 110.50 support on a daily closing basis (New York 5 pm EST), the bullish scenario is alive.
The one warning I have about buying Friday’s candlestick is what happened on Thursday. I don’t like to see that much selling pressure just before a buy signal as it tends to challenge the integrity of the setup.
In other words, there’s no clear indication that buyers are in control at the moment, at least not enough to entice me to go long.
As I mentioned last week, the USDJPY has been a somewhat tricky pair to read. Yes, the market has been in an uptrend for several months, but the choppy price action since May makes it rather unattractive when compared to others in my opinion.
For now, the 110.50/70 area remains support while key resistance comes in at 112.00 followed by 113.20.
Since the late June and early July lows at 0.7310, the AUDUSD has been carving what appears to be a falling wedge pattern. I’ve mentioned it a couple of times over the last two weeks.
However, buyers have had an incredibly difficult time even after the mid-August bounce from 0.7200. Friday’s session took out that low and put the AUDUSD at levels last seen during the first two days of 2017.
While this wedge pattern is technically still intact, it isn’t something I’ll be using as a buy signal anytime soon. The way the market sold off last week isn’t an encouraging sign if you’re an Australian dollar bull.
Furthermore, the pair is retesting support again after failing to reach wedge resistance toward the end of August; not a good sign if you’re looking to buy the AUDUSD.
I’m going to stand aside for now to see what develops this week. A daily close below wedge support could extend recent losses, but the pair is approaching an extremely critical 2016 support area at 0.7160, so downside pressure may be limited.
In summary, it’s going to take bullish price action from the 0.7160/90 support region to pique my interest. Key resistance comes in near 0.7330 followed by 0.7460.
I haven’t paid much attention to the USDCAD lately and for good reason. The price action so far in 2018 has been choppy, particularly the period between late April and early June.
However, since topping out a couple months ago at 1.3385, the pair has formed what appears to be a bull flag. We know it’s a descending channel, and given the uptrend since September 2017, it makes sense to view it as a (pending) bullish continuation pattern.
On top of that, the USDCAD formed a bullish rejection candle last week. The upper wick is too long to label it a pin bar, but the extended lower wick does suggest an increase in demand below 1.3000.
What’s interesting about the pending bull flag in the chart below is its measured objective. The height of the flagpole that began with the April low and stretches to the June high is 860 pips.
If last week’s low at 1.2887 is indeed the low of this channel, it places the objective at 1.3750 or thereabouts. Once identified, the next thing I like to do is zoom out to see if there’s anything special about the 1.3750 area.
As soon as you do that, you’ll notice that 1.3750 is the closing price of the 2017 high. That could be pure coincidence, or it may signal that the pair is gearing up for a multi-week and perhaps multi-month ascension to 1.3750.
Buyers have their work cut out for them though. Before we can even think of buying the USDCAD, we need to see a daily close (New York 5 pm EST) above channel resistance near 1.3090.
Until that occurs, the pair will remain under pressure. I would like to see last week’s low of 1.2887 hold though. If that support level were to break, I would begin to question the integrity of this bullish continuation pattern.
A daily close above channel resistance near 1.3090 would target the year to date high at 1.3385. A close above that would expose 1.3585 followed by the measured objective near 1.3750.
Alternatively, a move below last week’s low of 1.2887 would begin to challenge the notion that this is a bull flag pattern.