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This week promises to be a big one for EURUSD.
Not only is there a significant Brexit vote on Tuesday, but we also have an ECB rate decision and presser on Thursday.
Although the Brexit vote will mainly target the pound, the euro won’t escape the volatility.
As always, the fundamental outcome doesn’t matter to me.
The technicals are all I need.
However, it is a good idea to know when they are occurring so you can manage any exposure as necessary.
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So far, the euro has struggled to make progress one way or the other.
But as I wrote on Friday, that isn’t surprising given this week’s events.
Perhaps the Brexit vote on Tuesday will set EURUSD free. Or maybe the euro is waiting on Thursday’s ECB decision to make its move.
Either way, the bullish reversal pattern you see below is tentative.
It’s going to take a daily close (New York 5 pm EST) above the neckline to confirm the reversal.
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The measured objective for the pattern would be 1.1700 if confirmed.
The 1.1700 horizontal area lines up with what could be channel resistance and is also the 38.2% Fibonacci of the year-to-date range.
Alternatively, if sellers take out the November 28th low at 1.1267, it would likely negate the bullish potential and would re-expose 1.1215 support.
GBPUSD looks poised to continue moving sideways until Tuesday’s Brexit vote.
That was a possibility I mentioned a couple of times last week.
It’s okay by me as I have no intention of trading the pound anytime soon. The upcoming increase in volatility alone is enough to keep me sidelined.
We were also monitoring what appeared to a be a wedge pattern last week.
The lower level was range support at 1.2700. Wedge resistance extended from the November high at 1.3174.
Thursday’s session appeared to have broken free, but I’m not so sure given Friday’s pullback.
Again, it’s a non-issue for me as I have no desire to risk capital here given the events that lie ahead this week.
I’ve also made my intentions clear to Daily Price Action members.
GBPUSD is a waiting game for now. Tuesday’s vote will undoubtedly shake things up and could very well be the catalyst to set the pair free.
Until then, any pound exposure is too much of a gamble in my opinion.
I mentioned the possibility of a USDJPY wedge last Sunday.
The upper level was more established than the lower one, but it was still something to keep an eye on.
Buyers were tested on Thursday. The retest of wedge support near 112.30 triggered a slight bounce that carried into Friday’s session.
However, so far, that bounce looks relatively weak.
USDJPY bulls only managed to push prices higher by 70 pips following Thursday’s test of key support.
And even then, those buyers lost some momentum before the weekend.
I wouldn’t be surprised to see another retest of wedge support early this week. And if it happens, it would be a somewhat bearish sign for the USDJPY.
Multiple retests of a key level within a relatively short period of time often leads to a breakout.
Of course, that’s just speculation. As long as wedge support at 112.40/50 is intact, USDJPY has the potential to rally back to resistance at 113.80/90.
If sellers do break the 112.40/50 support area on a daily closing basis, it would expose 111.70 and perhaps 110.70.
EURCAD bulls were on the move again late Friday following Wednesday’s breakout.
I first mentioned this falling wedge on November 19th. At the time, EURCAD was trading well below key resistance.
However, the descending price action since June hinted at a topside break.
I went on to discuss this same formation on November 30th and again on December 4th.
That commentary on the 4th is where I mentioned a clue.
Here’s what I wrote:
If EURCAD marches higher this week and retests resistance, there’s a good chance we’ll see a break higher.
Repeated retests of a level often foreshadow a breakout. EURCAD would not be an exception to that rule.
The EURCAD finished that same day 60 pips higher. And by December 5th, the pair had cleared wedge resistance by nearly 40 pips.
That was the breakout I had been waiting for since the 19th of November.
Buyers didn’t waste any time taking EURCAD higher. Thursday’s session reached a session high just below our first resistance level at 1.5320.
It amounted to an impressive 160 pip single session rally.
However, the final 24 hours of last week is what I want to focus on.
Following Thursday’s retest of the area just below 1.5320, the euro cross gave up more than 200 pips.
That would be a surprise if it were any other pair.
The Canadian dollar crosses can cover a lot of ground in a hurry. EURCAD is no exception.
Now, notice where Friday’s session caught a bid. That low of 1.5100 was the retest of former wedge resistance as new support.
I even called attention to this in the member’s area.
Here’s the comment I made:
The fact that buyers not only held on but closed EURCAD off its session low by 80 pips is a relatively bullish sign.
As long as this new support area between 1.5100 and 1.5130 remains intact this week, all eyes will be on that 1.5320 region.
But as I mentioned last month, there’s a decent chance that EURCAD can reach the June high at 1.5580 before this is over.
That’s the inception point of this falling wedge that began in June.
I first pointed out this CADJPY ascending channel on October 29th.
The pair was well above support at the time, but the formation had a bearish feel to it.
However, CADJPY was in no rush.
It wasn’t until November 20th that sellers tested channel support near 84.65. And after a brief rally, bears cleared channel support on December 5th.
The first key support level following the break was 83.80/90. I pointed out this level in Wednesday’s commentary.
Sure enough, CADJPY bounced from the area on Thursday.
The buying pressure was so intense that it took the pair back to former channel support (new resistance) at 85.00.
We even saw CADJPY trade above this area for a few minutes on Friday.
However, sellers eventually stepped in and erased 50 pips from Friday’s rally just before the weekend.
That keeps new resistance at 84.90 – 85.00 intact for now.
As long as this resistance area holds on a daily closing basis, I will remain bearish CADJPY.
That key support at 83.80 will likely become a factor if tested again this week. A close below that would expose 82.30 and perhaps 80.55.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.
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