Get 40% Off
to Daily Price Action.
Ends March 31st!
EURUSD finally showed its hand on Friday.
I wrote about the wedge pattern you see below on Wednesday of last week.
At the time, the euro had just bounced from support near 1.1320. However, we were still waiting for a breakout.
That move came just before the weekend.
I’ll be the first to admit that I don’t like Friday breakouts. The lack of volume before the weekend can sometimes lead to false breaks.
One way to sidestep the risk of a false break is to wait and watch.
If EURUSD reacts to the 1.1320/30 area as new resistance this week, it would suggest that the pair is likely headed lower.
Get daily Forex setups and lessons from me on WhatsApp.
Text "Join" to +1-240-778-3679 (save this number in your phone's contact list)
In other words, watch for bearish price action from that 1.1320/30 region.
As I pointed out last week, key support now comes in at the year-to-date low of 1.1215. A daily close below that would open the door to 1.1130.
Alternatively, a daily close back inside this wedge would negate or at least delay the bearish outlook.
GBPUSD broke free from a significant range last Monday.
I discussed the implications of a break from this 560-pip range several times over the last few weeks.
The most relevant comment came on November 27th.
I mentioned how a daily close below 1.2700 support could trigger a 560 pip move lower toward the late 2016 and early 2017 lows near 1.2140.
Last Monday’s breakdown may have opened up that target.
We even saw sellers defend the area just below 1.2700 as new resistance during Thursday’s session.
As for this week, we could see a slight bid develop near 1.2560. However, I don’t expect it to last long.
The trend is clear, particularly after Monday’s break of 1.2700.
As long as that area remains intact as new resistance, GBPUSD is likely headed for 1.2410 followed by 1.2300.
Don’t forget that the recent 560-pip range suggests the breakdown could target the 1.2140 region.
That’s more than 400 pips away following Friday’s close.
USDJPY is one pair you don’t want to ignore.
We’ve been tracking this wedge pattern for two weeks now. My first mention of it was in the December 2nd weekly forecast.
Since then, the pair has bounced from wedge support on the 6th and 10th but has yet to reach wedge resistance this time around.
If USDJPY fails to reach 113.80 this week and instead rolls over, I would expect a breakdown within a matter of days.
A failure to retest resistance at 113.80 would suggest weakness.
However, as I’ve pointed out several times recently, it’s important to stay neutral until the market makes its move.
But I will be watching to see how the pair reacts within this wedge as well. A market will often offer clues that precede the actual breakout.
Be sure to review my USDJPY commentary from December 11th. In it, I discuss the potential of this 470-pip wedge pattern.
Key support following a break lower comes in at 111.70. Alternatively, a break higher would expose the year-to-date high at 114.50.
EURJPY has been range bound for the better part of 2018.
It isn’t obvious though if you’re only viewing the last couple months of price action. Since bottoming out in late October, EURJPY hasn’t managed to do a whole lot.
In fact, since November 12th, the pair has been locked in a 170 pip range. That’s 25 trading days to put things in perspective.
But a look back to mid-February shows the beginning of a much more impressive 800-pip range.
The pair last tested the range ceiling at 133.10 in late September.
If the movement following the prior test of 133.10 in late April is any indication, the EURJPY may have another 300 pips left in this recent down move.
So what’s the plan for this week?
In my opinion, it’s going to take a daily close below trend line support in the 127.90 to 128.00 area to trigger the next leg lower.
By “daily close”, I’m referring to the New York close at 5 pm EST. Anything else can result in a false break.
Go here to get instant access to the same charts I use to trade price action.
Keep in mind that the region just above 127.50 may also attract a few buyers on the way down. 126.60 is another level to keep an eye on.
Those levels will probably only trigger temporary pauses though.
It’s pretty clear from the daily time frame that a close below trend line support would re-engage the 800-pip range that began earlier this year.
That suggests an extended move to the range floor at 125.00.
We’ll see how EURJPY reacts to support over the coming sessions. But at the moment, this appears to be a top trade idea as we enter the last couple weeks of 2018.
On Thursday of last week, I mentioned how CADJPY had reached a key inflection point at 85.00.
In truth, the area was between 85.00 and 85.10 as I wrote on Thursday.
At the time, CADJPY was trading just above the 85.00 handle. However, as you probably know by now, the daily close was a key factor.
Thursday’s close at 85.04 left resistance intact. It also triggered a 40 pip selloff on Friday.
I remain short here with a target that’s 400 pips away even after Friday’s move.
If you aren’t already short, you could look to sell on strength this week. Perhaps a retracement up to 84.70 or 84.80 will offer something.
Alternatively, the next significant breakdown won’t materialize until sellers take out 83.80 on a daily closing basis.
You can see in the chart below how 83.80 has served as support for some time now.
As long as CADJPY remains below former channel support on a daily closing basis, I will stay bearish here.
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.
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.