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Buyers were in full force on Friday, driving the EURUSD higher by more than 100 pips. Being the last trading day in June, Friday’s price action illustrates the unwind in short positioning that had built up since the April 20th breakdown.
Given Friday’s surge, it’s reasonable to expect the buying pressure to continue this week. That said, it’s going to take a daily close (New York 5 pm EST) above 1.1720/30 to expose higher prices.
One such higher level is 1.1830. The area served as a pivot between the 9th and 22nd of May. It also capped several advances during the first half of June.
Range support comes in at 1.1520/30. It seems it’s going to take a daily close below this level to reinvigorate downside pressure.
I’m going to stay on the sideline until buyers manage a daily close above 1.1720/30 or sellers secure a close below 1.1520/30. Until then, expect a ranging market.
Much like the EURUSD, the GBPUSD caught a bid last week just above the 1.3040 handle. Buyers were also able to close the pair back above 1.3160 before the weekend.
As such, I’d expect any retest of 1.3160 as new support to attract an influx of buying pressure. Key resistance for the week ahead comes in at 1.3300 followed by the May/June pivot at 1.3460.
There is also a descending channel (also referred to as a downward sloping flag) that has developed since the May 14 high. I will more than likely discuss the pattern in greater detail later this week.
After an aggressive second leg rally that began June 14th, USDCAD bulls faltered last week. Not only did the pair close back inside the ascending channel that extends from the 2017 low, but it also carved a bearish engulfing week.
That places resistance near the 1.3240 area, though I doubt buyers will be able to push prices that high in the coming week. Instead, I think the 1.3200 handle will attract selling pressure on a retest of the area as new resistance.
Key support comes in right around the March 2018 high of 1.3120. A close below that would expose 1.3000 followed by the 1.2800 region.
Keep in mind too that you could draw a short-term trend line from the April 2018 low. It would connect with the May lows and could offer some support on the way down. At the same time, a break below it could provide a fresh opportunity for shorts.
Given last week’s close, I wouldn’t be at all surprised to see the USDCAD trend lower toward the confluence of support at 1.2540/50 over the next few weeks.
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Much like the USDCAD, the EURCAD has carved an ascending channel, albeit a much smaller one.
However, unlike the dollar pair, the EURCAD has yet to break below channel support. Friday’s session came close, and sellers did manage to close the cross well below the session high, but support at 1.5320 remains intact for now.
I entered short on June 25th at 1.5580. The idea was based on the retest and rejection of channel resistance as well as the long upper wick on the 22nd of June.
I’ll consider adding to the position following a close below channel support near 1.5320. Such a break would expose the recent swing low at 1.4920 with a close below that opening the door to the 1.4740 handle.
While still premature, there’s reason to view the price action since the November 2017 low as a head and shoulders pattern. This is something I’ll keep an eye on, particularly given the massive 1,300 pip range of the pending formation.
Nearly two weeks ago I mentioned a potential 1,350 pip drop for the EURAUD. Over the last seven months, the Euro cross has carved what appears to be a 1,000 pip head and shoulders pattern.
In the June 20 commentary, I pointed out the 1.5770/80 area as resistance. And although the pair has spiked above this region intraday, sellers have kept prices capped below the 1.5800 handle.
As such, the potential reversal pattern is still in play. However, while it isn’t necessarily a bad idea to look for shorts on intraday spikes above 1.5800, a break below the short-term trend line shown below may be the “safer” approach.
Of course, we’ll need to wait and see how the EURAUD responds to the trend line just above the 1.5700 handle. But at the moment, a close below the trend line would expose 1.5620 followed by 1.5460.
We could see a few more days of sideways movement here before a break one way or the other. As long as the resistance area between 1.5780 and 1.5840 is intact, I will stay bearish the EURAUD.
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