The EURUSD is teetering on a significant level heading into this Wednesday’s Fed rate decision. The 1.0515 handle has served as support since the pair came off its 3,500 pip plunge in early 2015.
This retest comes after last week’s failed attempt to breach the January low at 1.0710. Although buyer’s managed a close above the level on Monday, they were unable to follow through.
Thursday’s ECB presser was the last nail in the coffin for the bulls. After a brief rally above 1.0820, the pair reversed course and sold off aggressively, eventually leading to a loss for the week. The quick rally above 1.0820 also closed the gap that I mentioned last Monday.
For the coming week, key support comes in just below current prices at 1.0515. A close below that would expose 1.0350. On the other hand, a move higher would likely find sellers near 1.0710.
Keep in mind that this Wednesday’s Fed rate decision is likely to cause extremely volatile conditions for the US dollar. As such, it may be prudent to wait for the dust to settle before considering an entry.
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Last week’s high for the GBPUSD came in just shy of the post-Brexit swing low at 1.2790. This was an area I mentioned in the previous weekly forecast.
As of last week, it appears we have a rising wedge forming on the 4-hour chart. The lower level extends from the October 25th low and has played a supporting role on three separate occasions.
While you could draw this level from the October 7th flash crash low, I prefer the approach shown below. The volatility on October 7th can show a very different low from one broker to the next.
A close below this support level would open the door for a retest of the 1.2326 handle. On the flip side, should we get a push higher, a confluence of resistance resides just above 1.2790.
With that said, the relative strength of the pound against the US dollar of late makes shorting the GBPUSD my least favorite option.
The AUDUSD is backing itself into a corner. After breaking below a ten-month support level on November 11th, buyers have enjoyed a bit of a relief rally over the last three weeks.
What makes this a relief rally is a contrast in momentum. If you look at a daily chart, you’ll notice how the sharp selloff that started November 9th compares to the price action since the retest of 0.7330.
This suggests that the consolidation over the last few weeks will likely break to the downside. And that makes the wedge pattern you see below a bearish continuation pattern, at least that’s the idea at the moment.
But as always, we first need to see a close below support. And ideally, I’d like to see buyers step in once again near 0.7420 if the pair is to break down. That would help validate the importance of the support level and thus add conviction to any resulting short opportunity.
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The NZDUSD gave a decent sell signal last Thursday. This came on the back of a retest of former ten-month trend line support, now resistance.
Although the pair didn’t quite carve out a bearish pin bar, the long upper wick did suggest that sellers were in the area. I commented on Thursday’s bearish formation, noting that the 0.7185/90 area would likely attract offers.
Sure enough, Friday’s session high was 0.7188. I managed to get a half-sized position at 0.7182 and will look to add to it should the pair weaken further.
Why only half-sized, you ask?
Because as mentioned on Thursday, my preference is a 4-hour close below channel support. But the combination of Thursday’s bearish rejection and Friday’s retest offered a chance to pyramid into an extended move lower that I simply couldn’t pass up.
From here traders can watch for weakness below ascending channel support. A break below that would expose the confluence of support at 0.6970.
The EURCAD bounced from a critical level last week. The 1.4050 handle is the December 2015 low and also served as both support and resistance between 2014 and 2015.
I mentioned the possibility of a retest of broken trend line support last week, but buyers failed to make it happen. Instead, the Euro lost significant ground following Thursday’s ECB presser.
But despite the failure to retest the 1.4440 area, there may still be an opportunity here for the upcoming week. The weekly close below 1.4050 suggests that the area will likely attract sellers on a retest.
Of course, just like the twelve-month trend line, there’s no guarantee that such a retest will materialize. But it’s always a good idea to have a plan in place in case it does.
From here traders can watch for selling opportunities on a rotation back to support-turned-resistance at 1.4050. Key support comes in at 1.3760, which was the neckline for the inverse head and shoulders that developed last year.
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