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EURUSD looked as confused as ever last week.
Just when it seemed like Tuesday’s bullish engulfing candle would take prices higher, Wednesday’s session erased all of those gains and then some.
It’s a degree of indecision that has plagued the single currency since October 2018.
In fact, I could argue that EURUSD has been in consolidation mode since May of last year. That’s when this choppy price action began.
With that in mind, I think it’s wise to limit expectations. These market conditions are not conducive to 400-pip targets.
Something closer to 100 pips or 150 pips at most seems more appropriate.
That’s exactly what we may see from EURUSD if the 1.1215/40 support area can trigger a bounce over the coming sessions.
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Should buyers take the euro higher this week, a target near 1.1450/80 would make sense given the descending channel that is now visible.
GBPUSD has been another tough pair to read this year.
We’ve seen a couple of false breaks from the pair just in the last six weeks.
But more than that, the erratic price action in 2019 makes GBPUSD less than ideal for trading. The same can be said for EURUSD.
The false break above descending channel resistance last month is indicative of continued weakness.
Of course, it’s going to depend on how the market reacts to the 1.3000 area if and when tested as new resistance.
Bearish price action such as a pin bar from that area could trigger a move lower.
Although a daily close back above 1.3000 would be bullish, I wouldn’t be a buyer given how the level already failed to serve as support earlier this month.
Key support for the week ahead comes in at 1.2700. I’d also expect to see bids crop up on a rotation lower toward last week’s low near 1.2780.
USDJPY has been in rally mode since the January 3rd flash crash that rocked the yen pairs.
I wrote about USDJPY on Wednesday of last week. Buyers had just broken above 110.00 and looked poised to challenge the next key resistance at 111.40.
But as I wrote last week, that 111.40 resistance level could be as high as 111.70.
USDJPY bulls struggled on Thursday, and even Friday’s session didn’t show much resilience from buyers.
That said, as long as the pair is above the 110.00 support area on a daily closing basis, the short-term rally is intact.
I won’t attempt shorting USDJPY from 111.40/70 unless I see bearish price action such as a pin bar.
It’s too risky to sell into this rally without some form of confirmation in my opinion.
An alternate approach is to watch for a buying opportunity from the 110.00 support area. But again, I’d prefer to see a price action signal first.
CADJPY carved a bearish engulfing pattern last Thursday.
A formation like that at or near a swing high usually suggests buyers are exhausted.
However, the markets have been difficult to read so far in 2019.
We’ve already seen several candlestick patterns fail this year, not to mention the false breaks on the daily and even weekly time frames.
With that in mind, I’m not sure sellers will be able to keep CADJPY below 83.80 this week.
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If they fail to do so, there is a much more significant resistance level closer to 84.50.
It’s the former channel support from the 2016 low. Between 83.80 and 84.50, I’d much prefer shorting CADJPY from the latter.
Not only because it would offer a more favorable risk to reward ratio, but because 84.50 is a more significant level in my opinion.
Key support comes in at 81.90 and 80.55. But as I wrote last week, bounces are likely while above 82.90.
On February 3 I pointed out a key support level on Gold (XAUUSD) at 1300.
The significance of the level isn’t apparent from recent price action.
However, a study of the movement between February and June of last year illustrates why I liked 1300 as support.
Since then gold has tested the area several times. The market has also consolidated nicely above the region since late January.
But Friday’s rally suggests the consolidation may have come to an end.
If so, we could see gold extend recent gains above key resistance near 1320/5. That would expose the next resistance area between 1350 and 1360.
Just bear in mind that it’s going to take a daily close above 1320/5 to secure the breakout. Until then, the area will continue to attract sellers.
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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