Let’s kick things off with EURUSD, a pair that ended the week in epic fashion. After a long descent of 3,500 pips, the most traded currency pair in the world appears to be finding its footing just above parity.
Although the bears were able to cap gains at the 1.1270 level, the pair looks ready to continue its push higher into next week.
One thing to note here is that we have yet to see a retest of 1.1035 after breaking out last Wednesday. This leaves us watching for bullish price action from this level in the week ahead.
While the Euro isn’t out of the woods by any stretch of the imagination, the pair is extremely overextended to the downside on the weekly and monthly time frames. This alone gives us reason to believe that something of a relief rally is in order.
Summary: Watch for bullish price action on a retest of 1.1035 as new support. Key resistance comes in at 1.1270 and 1.1530.
Contrary to its counterpart, GBPUSD suffered major losses to end the week to the tune of 350 pips from its weekly high. This bearish momentum puts into question the sustainability of the rally that began in mid April.
However all hope is not lost for the bulls as the pair approaches a key support area between 1.4980 and 1.5050. On the other hand, the large bearish pin bar on the weekly chart suggests that this area may not be enough to keep prices elevated.
A daily close back below the 1.4980 level would be seen as extremely bearish and could trigger a move back to multi-year lows.
Note: Elections are scheduled for May 7th so expect increased volatility surrounding this event.
Summary: The mixed signals from last week combined with the upcoming elections have us sidelined for now.
With Euro strength and pound weakness it doesn’t take long to figure that EURGBP had a breakout week. In fact we have to go all the way back to May of 2011 to find a similar one-week gain of 240 pips.
The bulls managed to break not just one, but two key resistance levels at .7290 and .7370. Although the pair closed the week above .7370, I’m not overly fond of buying this pair, at least not just yet.
From a mean reversion standpoint, EURGBP is overextended at current levels. As such I would like to see the pair consolidate some of last week’s gains before considering an entry.
Summary: On the sidelines until the pair is able to consolidate and build a stronger foundation for a move higher. Key support resides at .7370 and .7290 while resistance comes in at .7485 and .7592.
Horizontal support and resistance levels don’t get much more obvious than that of the USDCAD daily chart. The pair continues to trade below the former support area at 1.2380, leaving us watching for a retest as new resistance.
An interesting observation here is that the 50% retracement from the March 18th high to the April 29th low lines up perfectly with 1.2380. This gives us further reason to believe that any retest of this area will be met with strong selling pressure.
Summary: Watch for bearish price action on a retest of 1.2380 as new resistance. Key support comes in at 1.2000. Alternatively, a daily close above 1.2380 could trigger a move back to the 2015 highs at 1.2800.
Last but not least is NZDUSD. I mentioned this rising wedge pattern last week noting that a close below it could trigger a move back to the .7444 support area.
That close came during Friday’s session as the pair tumbled 75 pips from the open. Now that we have a convincing close below support we can begin watching for a retest of the area as new resistance.
Key support levels to keep an eye on over the coming week include .7444, .7311 and .7170. The most immediate level at .7444 is sure to attract buyers if retested.
Summary: Watch for bearish price action on a retest of the new resistance area between .7580 and .7620. Key support comes in at .7444, .7311 and .7170.