EURUSD was a mixed bag last week. The pair started out strong with a three day rally that saw an intraday break of the 1.1275 key handle, however the selling pressure above this level proved too strong as the pair quickly lost ground during Thursday’s session.
Friday was another down day that forced a retest of the 1.1050 support level. The level held up during Friday’s session, leaving the bias neither bullish nor bearish to start the new week.
As long as the pair remains above channel support (chart below) I will continue to respect the potential for another bullish advance. Only a daily close below this level would turn me bearish.
Summary: Standing aside for now. A daily close below channel support would expose the next key level at 1.0850. Alternatively, a daily close above 1.1275 would expose the May highs at 1.1452.
GBPUSD ended last week in much the same way as its EURUSD counterpart. After starting the week with a test of the 1.5195 support level, the pair quickly rallied back to resistance where the selling pressure resumed once more.
There isn’t much to do here at the moment with the pair trading so close to both support and resistance. I will remain neutral as long as the pair trades between the 1.5195 support level and resistance at 1.5353.
Summary: Standing aside for now. A daily close below 1.5195 would expose the 1.4980 handle while a daily close above 1.5353 would open up the door for a retest of resistance at 1.5500.
USDCAD continues to bump its head along channel resistance. The pair spent all of last week fighting to break free, however the bears finally took control during Friday’s session to close the day as a bearish engulfing bar.
With the pair so close to resistance and at the same time not wanting to short the US dollar, I’m left waiting for a more favorable buying opportunity. From here we can watch for a rotation lower in the coming week to retest the 1.2380 support level. A break there would expose the next support level at 1.2304.
Summary: In “wait and see” mode for now. A daily close above channel resistance would expose the 1.2560 horizontal resistance level. Alternatively, a daily close below 1.2380 would open up the potential for a push lower to the 1.2304 support level.
Next up is a pair that I have talked about at length over the past several weeks. The bullish breakout in EURCAD last week provided a great buying opportunity as the pair rallied 400 pips after breaking free from the 1.3765 key resistance level.
However the rally was short-lived as sellers made their presence known above the key handle. Friday’s session confirmed their bearish conviction as the pair lost a massive 230 pips.
From here we can watch for bullish price action on a retest of the neckline of the inverse head and shoulders at 1.3765. A daily close below this level would invalidate the reversal pattern and expose the 1.3670 support level.
If on the other hand the bulls are able to regain control this week, a daily close above 1.4070 would open up the potential for a completion of the inverse head and shoulders with a retest of 1.4480.
Summary: Watch for bullish price action on a retest of the 1.3765 neckline. A daily close below this level would invalidate the reversal pattern. Key resistance comes in at 1.3915 and 1.4070.
Similar to EURCAD, EURJPY had a breakout week in which the pair was able to breach key resistance at 136.70. While it may be tempting to sell the pair at current levels, I prefer buying the pair at support as long as it remains on the topside of 136.70.
The ascending channel on the daily time frame gives us a great view of areas to watch for bullish price action. While a retest of 136.70 would be ideal, we also can’t rule out the possibility of buyers stepping up at 137.90 – a level that has a lot of confluence as both a key support and resistance area as well as multiple Fibonacci levels.
Either way I’d like to see the pair retest channel support before considering a long opportunity.
Summary: Watch for bullish price action on a retest of key support at 137.90. A daily close below this level would shift our focus to former resistance at 136.70. Key resistance comes in at 140.60 and 142.27.
Last but certainly not least is GBPNZD, a pair that arguably has the most immediate potential for the new week.
I have been talking about the long-term reversal pattern that has been forming for months now. The 2.1040 level, which was broken on May 11th, was the trigger for an extension of the bullish advance that began on April 21st.
After rallying almost 2,000 pips, the pair began digesting gains on May 13th in the form of a rising wedge. Typically a pattern such as this eventually gives way to the downside, however the bulls had different plans during Friday’s session.
The break of wedge resistance as seen in the chart below is significant as it represents not just a 4 hour break, but a daily and weekly break as well. From here we can watch for a buying opportunity on a retest of former wedge resistance as new support.
Summary: Watch for bullish price action on a retest of former wedge resistance as new support. Key resistance comes in at 2.2000 and 2.2250 while my long-term target for GBPNZD remains 2.4400.