The EURUSD is set to start the week in a familiar range.
Since October 24th, the single currency has been capped by 1.1450 on a daily closing basis.
The low for the range is 1.1215, although 1.1300 has been the primary defensive position for bulls.
Last week I pointed out a possible falling wedge pattern.
Both support and resistance are well defined, and the descending nature of the structure points to an eventual break higher. Perhaps much higher.
However, as I mentioned on Friday, EURUSD bulls need a close above 1.1460 to confirm the pattern.
Notice how buyers came close on Friday but didn’t quite make it.
As we move into a new week, I’m marking that level closer to 1.1450. That’s the intersection of our key horizontal level and falling wedge resistance.
A daily close above 1.1450 would expose 1.1530 and 1.1620. But the euro is vulnerable while below it.
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Key support comes in at the 1.1300 handle.
I don’t expect much action in the first half of the week given the New Year’s holiday.
We may even have to wait until Friday’s non-farm payroll to see whether buyers can clear 1.1450.
Either way, I’m going to keep a close eye on EURUSD.
The hesitation from GBPUSD continued last week.
I’ve warned sellers a few times recently, including my December 21st commentary.
I also wrote about how buyers aren’t ready to back down on the 26th.
The way the pound has hovered just below the 1.2700 handle suggests buyers are soaking up every offer that hits the market.
At the same time, sellers are hitting every bid above 1.2700.
In other words, supply and demand are at an equilibrium hence the sideways movement.
Notice the pair’s inability to retest 1.2560 despite several bearish candles last week.
Instead, GBPUSD continues to skim below 1.2700 resistance (much like EURUSD and 1.1450).
I’m still neutral here, but would not be surprised to see a daily close above 1.2700. Such a break would expose 1.2880 and perhaps 1.3070.
Key support for the week ahead comes in at 1.2560.
Like several other yen pairs, USDJPY has played out perfectly for sellers.
I first pointed out this wedge pattern in the December 2nd weekly forecast. At the time, the pair was trading near 113.50.
Following another retest of wedge support, the market as a whole gave us some clues on the 17th.
The yen’s sensitivity to risk assets such as the S&P 500 is a key driver for USDJPY.
It just so happens that the S&P had broken a critical support level on December 15th. That signaled a potential risk-off scenario (aka a lower USDJPY).
And that’s exactly what happened.
By December 18th, the risk-sensitive pair had closed below wedge support. The pair then retested old support as new resistance on the 19th.
As of last week’s close, USDJPY shorts are up 230 pips.
But sellers aren’t done just yet in my opinion.
The 108.00 area is my final target at least in the short-term which is over 200 pips below Friday’s close.
That said, I do expect to see buyers defend the 109.80 area if tested this week.
Key resistance stretches from 111.40 to 111.70. As long as this area is intact on a daily closing basis, I will continue to favor selling USDJPY.
CADJPY nearly reached my short-term target on Friday.
I first mentioned this ascending channel back on October 29th when the pair was trading more than 500 pips higher.
Even the title of that post hinted at the 400+ pip opportunity.
Then came the breakdown on December 5th.
Sellers didn’t waste any time taking prices lower. However, the bounce from 83.80 did produce a retest of former channel support as new resistance near 85.00.
My short-term target has been the 80.50 region since October. There are several lows here in mid-2017, and it also remains the year-to-date low.
As such, I do expect buyers to put up a decent fight at 80.50/60.
However, there is a much larger channel on CADJPY that hints at eventual losses well below 80.50.
I wrote about this pattern on the 18th of December.
Even a simple retest of that channel’s inception point equals a 74.80 print in 2019. But a move that significant won’t happen overnight.
It’s going to take weeks if not months to reach that longer-term target.
Immediate support for the week ahead comes in at 80.50/60. Key resistance resides just above last week’s high near 82.15.
Gold (XAUUSD) has been a swing trader’s dream.
Except for the mid-November plunge below 1215, gold has respected each horizontal level below perfectly.
Last week’s close above 1260 means the area should serve as new support moving forward.
I also have 1280 marked as resistance based on May’s low and the June 18th and 19th highs.
A close above that would expose the 1300 handle.
If gold continues to behave as it has since October, I anticipate a pullback into the 1260 area before the next leg higher.
Of course, there are no guarantees, but that would be the ideal scenario for those looking to get long.
A more shallow pullback into 1270 coupled with bullish price action could also present a buying opportunity.
Alternatively, a daily close back below 1260 would suggest a more substantial pullback into 1235.
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