It’s FOMC week and EURUSD is at a crossroads. A continuation of the current rally above the August high could be the start of something much larger for the pair, while a move below channel support that extends off of the 2015 low would confirm a six-month bear flag pattern.
Either way, I certainly won’t be making any moves until the Fed decision this Thursday. There is far too much sentiment and speculation surrounding the event to take a position beforehand.
Of the two possibilities, I would prefer to see the bearish scenario take shape as it would play into the pattern that has been developing since March. Of course a daily close below the 1.10 area would be needed to see that through, a level that is looking smaller in the rear-view mirror after last week’s rally.
Summary: Waiting for a daily close outside of the ascending channel that began in March before considering my next move. Key resistance comes in at 1.1330 and 1.1450 while support can be found at 1.1154 and 1.1020.
GBPUSD was another pair that clawed its way back last week after losing more than 600 pips between August 25th and September 4th.
Although last week’s rally looked impressive at a glance, the pair was still unable to climb above the 1.5465 handle. This area has acted as support and resistance since late April and was once again respected as resistance between Thursday and Friday of last week.
The bulls are going to need to muster enough strength for a daily close above this level if they intend to push the pair higher. However even then they would still face former trend line support off of the May low.
All in all I’m still bearish here and will continue to watch for selling opportunities. The breakdown in the last week of August was fairly telling in my opinion and would be extremely hard to overcome in order to reverse the bearish momentum that has been in place since August 25th.
That said, anything is possible in the Forex market, especially during FOMC week.
Summary: On the sidelines for now, however bearish price action at either 1.5465 or former trend line support could make for a compelling short opportunity. Key support comes in at 1.5355 and 1.5170. Only a close above the trend line from the May low would turn me bullish on GBPUSD.
USDCAD has quickly turned into one of the best looking wedge patterns I have seen in a long time. Since breaking above channel resistance on July 15th, the pair has been churning higher but has recently moved into a tight sideways consolidation pattern.
This is a pretty typical formation ahead of major event risk such as the Fed rate decision this Thursday. This churn we see is caused by indecision in the market as traders are hesitant to commit to a position in front of such an impactful event.
Due to the bullish momentum that has been in place since mid June, I will only be interested in a break of wedge resistance. As mentioned last week, regardless of what happens this Thursday, a sell would be a counter-trend trade and not something I want to pursue at this time.
A break of wedge resistance would expose the 2015 high at 1.3350 with a break above that targeting key resistance at 1.3470. This area acted as support and resistance in 2004 and is also the 61.8 Fibonacci retracement level from the multi-year high in 2002.
Summary: Watch for a buying opportunity on a 4 hour close above wedge resistance. From there, resistance comes in at 1.3350 and 1.3470. Alternatively, a 4 hour close below wedge support would negate the bullish bias and expose the 1.3060 key support level.
AUDCAD gained back some lost ground last week as the pair caught a bid at the 2013 low of 0.9170. However I still maintain a bearish bias here as long as the pair remains capped below the former two-year support level at 0.9410.
This level had held as support since August of 2013 before the pair dropped below it last month. What is remarkable about the break is that it represented not only a daily close below the level, but a monthly close as well, adding further conviction to the bearish scenario.
With that in mind we can begin to watch for bearish price action on a retest of the level as new resistance. There is no shortage of room to the downside if the bears can get behind this move and push the pair lower in the coming days and weeks.
Summary: Watch for bearish price action on a retest of 0.9410 as new resistance. Key support comes in at 0.9170, 0.8985 and 0.8800. Alternatively, a daily close back above 0.9410 would negate the bearish bias and open the door for further gains.
As mentioned on Friday, AUDNZD appears to have broken free of a two-month consolidation pattern. Although the resistance level could be drawn a couple different ways, Friday’s price action would indicate that the 1.1200 area is now acting as support.
From here we can watch for a break of Thursday’s high at 1.1263, which would signal that the bulls may be ready to retest the 2015 high at 1.1420. A daily close above that would expose the measured objective for the wedge pattern at 1.1720.
On the flip side, if the pair fails to maintain the recent bullish momentum and falls below Friday’s low at 1.1177, we will have to scratch the idea of going long on a move above 1.1263.
Summary: Opportunity to buy on a break above last week’s high at 1.1263, targeting 1.1420 and possibly 1.1720. A move below Friday’s inside bar would negate the setup and open the door for a retest of trend line support off of the July low.