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EURUSD closed the week just 40 pips from where it opened.
The single currency is holding above key support at 1.1215. However, it’s also still below descending channel resistance near 1.1430.
That leaves EURUSD range bound for at least one more week.
One thing I will say about last week’s price action is that buyers refused to give up much ground despite some selling pressure below 1.1370.
That resilience from buyers could be a sign that EURUSD wants to head higher this week.
But as I’ve mentioned many times recently, keep in mind that the euro has been mostly directionless since last October.
The range-bound price action suggests that any expectations should be limited to 100 pip moves or less.
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That’s particularly true when you consider how EURUSD is trading in the middle of a range between 1.1215 and 1.1430.
Just when it looked like GBPUSD sellers were back in control earlier this month, buyers closed the pair back above 1.3020 last Tuesday.
That’s the location of channel resistance that extends from the September 2018 high.
We saw buyers do the same thing last month. As you can see, they were unable to hold the pair above the level in early February.
We’ll see if this time is different. But just like the euro, the pound has been mostly directionless for several months.
As such, range-bound setups seem most appropriate.
Until we see GBPUSD regain its momentum, favorable setups will be rare.
For the week ahead, as long as GBPUSD can hold above the 1.3000 area buyers are in control. Key resistance comes in at 1.3200.
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Alternatively, a daily close below 1.3000 would expose the February low at 1.2770.
USDJPY continues to trend sideways below a key resistance area at 111.40/70. It has served as a turning point for the pair since May of last year.
However, USDJPY remains above key support at the 110.00 handle. You can see how this area served as a pivot between late December 2018 and early February.
I’m still under the impression that the price action since January is corrective.
In other words, the strength we’ve seen in 2019 could be temporary. That’s especially true when you consider the selloff that transpired last December.
But that doesn’t mean it’s time to sell USDJPY.
We could see buyers take the pair higher still. And without a proper sell signal from resistance, there isn’t much to do here.
Of course, a buy signal from the 110.00 support level could offer a short-term buying opportunity.
Alternatively, a sell signal from 111.40/70 resistance would carve an appealing short setup.
Since the January 3rd flash crash low, GBPJPY has regained over 1,000 pips.
That’s impressive considering the bearish pressure the pair was under throughout November and December of last year.
Then again, that extreme bearish pressure was no doubt part of the catalyst for this year’s bounce.
If you have followed me since May 2018, you will remember the massive GBPJPY ascending channel that began in 2017.
Here’s a refresher:
I wrote about it several times in the first half of last year.
The pair broke channel support on May 23rd. Following several retests including the July 16th pin bar, sellers eventually regained control.
That bearish pin bar alone was good for 900 pips.
If we turn our attention to the price action since that May low, we can see GBPJPY is carving another channel.
This time it’s a descending pattern.
As you can see from the chart below, GBPJPY is now trading in a zone in and around 145.00 that could attract sellers.
The 50% retracement of the range that spans from the 2018 high to the year-to-date low also comes in at 145.20.
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But it isn’t quite as straightforward as selling at 145.00 and walking away.
At least that isn’t how I would approach this market.
I think it’s going to take bearish price action in the 145.00 region to get the job done. That could be a pin bar or engulfing pattern.
Either way, I don’t want to step in front of buyers at this point.
The 145.00 resistance area will either trigger a reversal like that of last November or become the technical catalyst for a move higher.
Remember that descending channels are more likely to cause a break higher (eventually) than a break lower.
A selloff from here would likely encounter support at 141.15 followed by 135.60.
Alternatively, a daily close above the 145.00 area would expose the 2018 swing highs at 149.30.
Last Monday I wrote about a key resistance area for NZDJPY.
The level in question was 76.30. It’s the intersection of channel resistance and the horizontal level that supported the pair last November.
Although there wasn’t much bearish price action to speak of, the 76.30 level held up well last week.
In fact, Wednesday’s high was 76.31. It doesn’t get much closer than that.
In case you missed Wednesday’s retest, there is a short-term pattern that you may find helpful.
Before I get to that though, I want to reiterate that the January 3rd flash crash has made it a bit more challenging to read a pair like NZDJPY.
However, the channel you see below is still relatively well defined in my opinion.
The approach is similar to what I teach for any other ascending channel: wait for a daily close below support followed by a retest of the level as new resistance.
Of course, it’s ultimately your decision as to how you trade this if at all.
This channel is a little unique in that it doesn’t begin with the swing low from January.
But again, I’m forced to work around the extreme volatility that transpired last month.
The bottom line is that as long as NZDJPY trades below 76.30 on a daily closing basis, the pair is vulnerable.
It’s going to take a close below channel support near 74.40 to open up the next target at 72.40.
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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