EURUSD can’t seem to get out of its own way. Despite last week’s 160 pip rally, the pair remains capped by recent highs and continues to move sideways in choppy price action that began in early June.
The lack of conviction has led to limited follow-through by both the bulls and bears, making this an unfavorable pair to trade at the moment. I would much rather look for Euro strength or weakness elsewhere until EURUSD is able to show something worthy of a position.
Summary: On the sidelines for now. Traders can watch for the 1.1155 level to continue to act as resistance. A break there would expose the 1.1280 handle. On the flip side, the 1.1050 should act as support moving forward with 1.0925 being the next key level to the downside.
GBPUSD finally broke free from the wedge pattern that began forming in mid June. I mentioned the 4 hour break that occurred on Wednesday of last week, noting that traders should watch for bullish price action on a retest of the level as new support.
However the pound still faces its toughest challenge as it approaches the 1.5680 key handle. This area can be seen acting as both support and resistance since late May and was more recently the point of failure during the entire month of July.
Those who are long here should remain cautious in case the pair once again fails to breach this level. That said, a daily close above this level would open up the door for a retest of 1.5814, a level that hasn’t been seen since June 23rd.
Summary: Watch for a buying opportunity on a daily close above 1.5680. Key resistance comes in at 1.5814 and 1.5930.
AUDNZD has quickly moved to the top of my watch list after ending the week at key resistance. I mentioned this potential setup on Friday, noting that a daily close above 1.1300 is needed to confirm the breakout.
Also of significance is what appears to be an inverse head and shoulders pattern that has been forming since the first of July. Although typically a reversal pattern, the inverse head and shoulders can occasionally signal the continuation of a larger trend.
If that is truly the case, traders can look for a measured objective around 1.1730. However as mentioned last week, don’t forget that there are other key levels between the current price and the 440 pip objective.
Summary: Watch for a buying opportunity on a daily close above 1.1300. Key resistance comes in at 1.1428 and 1.1580 with a measured objective at 1.1730.
The 4 hour bullish pin bar that formed last week on AUDCAD has worked out beautifully for us thus far. Traders who entered using a 50% entry were able to get in with a 5 pip drawdown and ended the week with an unrealized gain of 115 pips.
From here we can watch for the 0.9620 area to act as support. To the upside we have resistance at the recent highs of 0.9750. Break that and we could see a retest of the trend line that dates back to April of 2013.
The docket for the upcoming week is pretty light for this pair so I’m not expecting the same kind of volatility that we have seen over the last couple weeks. That said, we are still in August which means the lack of volume combined with global concerns could fuel a continuation of the increase in volatility, so as always be sure to stay vigilant.
Summary: Those not in this trade can watch for a buying opportunity on a retest of new support at 0.9620. Key resistance comes in at 0.9747 and 0.9880.
NZDJPY could be on the move again after closing the week below wedge support. However the real opportunity for a continuation lower would come on a daily close below the multi-year low at 80.45. This level can also be seen acting as support and resistance in 2013.
I maintain my short position from the 91.80 area and my objective remains the same at 75.00. This area marks the measured objective of the larger head and shoulders pattern that confirmed in late June. It was also the focal point of several key lows and highs in 2013.
At this point I won’t be interested in adding to my position further until we get a daily close below the recent low at 80.45. A break there would signal that the trend is likely to continue and would therefore present a favorable selling opportunity.
Summary: Watch for a selling opportunity on a daily close below 80.45. Immediate support from there comes in at 79.30 and 78.50.