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EURUSD bulls broke through a significant level last week.
Monday’s 1.1474 close confirmed the break of falling wedge resistance that extends from April 2018. I discussed this pattern on Christmas Eve.
Tuesday’s session was mostly consolidation. But by Wednesday the euro was carving the highest price since October of last year.
That didn’t last long though.
The two-day pullback nearly erased all of Wednesday’s gains. It’s difficult to tell if it’s a sign of further losses or simply profit taking before the weekend.
Either way, I still think we could see bids develop at 1.1450/70 this week.
Even if EURUSD falls below 1.1450, the bullish potential is intact while above former wedge resistance (blue line below).
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If the single currency drops back below this level on a daily closing basis, I will turn bearish again.
For now, though, I’ll be watching to see how EURUSD reacts to the 1.1450/70 support area.
Key resistance comes in at 1.1620 followed by 1.1730.
GBPUSD has been trending lower since April 2018.
At the January 3rd flash crash low, the pair was down nearly 2,000 pips from the April 2018 high.
There’s no doubting the fact that sellers have been in control.
However, there is a pattern that GBPUSD bears shouldn’t ignore.
Similar to EURUSD, the pound has carved what appears to be a falling wedge pattern. Last week’s close above resistance suggests we could see bids develop going forward.
The “daily close” refers to the New York 5 pm EST close.
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At the moment, that trend line comes in near 1.2800. As long as the pair holds above it on a daily closing basis, the 1.3050/70 area is exposed.
Alternatively, a daily close back below the 1.2800 area could send GBPUSD back to 1.2700.
Keep in mind that Brexit will remain front and center for some time. As such, you should expect volatility both ways for weeks and months to come.
USDJPY hit my target at 108.00 in a hurry two weeks ago.
On December 17th, I published a commentary that explained why I felt a break lower was likely.
At the time, the pair was trading at 113.00. In fact, it was still well within the wedge pattern that had developed earlier in 2018.
However, the clues did point to a break lower, not higher.
USDJPY cleared wedge support on December 18th and retested the level as new resistance on the 19th.
Based on the height of the pattern, I felt a move to 108.00 was likely.
It seemed far-fetched at the time, but the January flash crash took out the 108.00 handle and even extended to 105.60 during the same session.
It was an intraday loss of more than 300 pips.
Events like the one on the 3rd tend to “flush” the market. Orders that weren’t supposed to trigger for days or weeks get hit in minutes or even seconds.
That leaves a pair like USDJPY scrambling to find its footing.
So far, it seems sellers have reached a short-term exhaustion point. But this is not a buying opportunity, at least not for me.
I think any bounce here is temporary. And if USDJPY moves back into that 109.80 resistance area, I will be on the lookout for bearish price action.
Key support for the week ahead comes in at 107.70 followed by 105.60.
On January 3rd I mentioned a USDCAD short opportunity.
The pair was coming off a multi-month resistance level and had just broken back inside a much smaller ascending channel.
The next four sessions totaled a loss of more than 300 pips.
However, with USDCAD still below 1.3320 and former channel support near 1.3400, the pair could see additional losses going forward.
But you also don’t want to chase.
Unless you’re already short USDCAD from two weeks ago, it makes sense to watch for a selling opportunity from 1.3320 resistance.
If we don’t get a signal from 1.3320, look to the 1.3400 area.
As I wrote on January 8th, my target remains the 1.3060 area.
NZDUSD is another one that’s worked out well for us.
On January 4th I wrote about the weekly bullish pin bar that formed at key support.
After a brief retest of the 0.6700 support area, NZDUSD rallied 100 pips last week.
Things still look relatively bullish from where I’m sitting. As long as the 0.6790 support area holds this week, we could see NZDUSD rally toward 0.6950.
But even that might not be the pair’s final target.
Given the (potential) ascending channel that’s forming, we could see NZDUSD rally as high as 0.7170 over the coming weeks.
However, it all depends on how the pair reacts to 0.6790 over the coming sessions.
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.Read more...
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