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Technically speaking, EURUSD bulls had everything going their way last week.
That is until Thursday’s pullback.
I’ve had this falling wedge pattern on my chart for several weeks now.
Usually, a descending structure like this one triggers a break higher and subsequent rally of some sort.
That’s especially true when dealing with a terminal pattern like a wedge.
EURUSD buyers got the break higher part right during Wednesday’s session but failed to follow through in the final 48 hours of the week.
The cracks in the bullish narrative began to show on Thursday.
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You don’t want to see buyers give up a 100-pip rally within 24 hours, yet that’s what happened between Wednesday and Thursday.
That low on Thursday took the euro right back to pre-breakout prices.
That isn’t a good sign if you’re looking to buy.
Buyers did manage to hold the pair above new support on Thursday, but the selling pressure before the weekend proved to be too much.
As of now, last week’s breakout appears to be false.
That means any retest of the 1.1330 area this week will likely encounter an influx of selling pressure.
Key support comes in around 1.1200 with a break below that exposing the trend line from the November 2017 low; perhaps around 1.1070.
GBPUSD illustrated once again last week why this trend line is so significant.
You can see how this short-term support level attracted bids at the March 11th open as well as last Thursday.
In my opinion, it’s the only level keeping GBPUSD bulls on the move.
But despite Thursday’s bounce and Friday’s follow through, buyers have struggled in recent weeks.
In fact, Friday’s close was a few pips below the late January high at 1.3217.
So despite showing resilience above trend line support, GBPUSD bulls haven’t made any progress in two months.
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These charts give you five equal 24-hour sessions each week and are essential for trading from the daily and 4-hour time frames.
Furthermore, that 1.3217 area may continue to attract sellers early this week.
I’ve drawn resistance at 1.3440 in the chart below, but first buyers need to clear that late January high.
All in all, GBPUSD is an unattractive pair to trade in my opinion.
Buyers are struggling to gain much traction and sellers are going to be put off by trend line support that extends from the year-to-date low.
That said, if you don’t mind trading a choppy market like this, it may be best to wait for a close above the January high before targeting that 1.3440 resistance level.
Alternatively, a daily close below trend line support near 1.3100 would expose 1.2960 and perhaps 1.2700.
On Thursday I pointed out a USDJPY pattern with bearish implications.
The broadening wedge that extends from the January 4th low signaled exhaustion from buyers.
This was in addition to last Wednesday’s Fed-induced break below 111.00.
In fact, that close below 111.00 was our cue to look lower.
Here’s what I wrote 24 hours before Wednesday’s FOMC:
What about a short here?
Well, remember that 111.00 is a must-hold level for buyers.
At least that’s my interpretation of the situation.
That means a daily close below 111.00 could present an opportunity to short USDJPY for a move to the 110.10 area.
And if the pair does roll over this week, it could signal the start of a broader correction toward 108.70.
Despite Thursday’s strength, USDJPY buyers failed to retake the 111.00 handle which was serving as new resistance.
Not only did sellers take out Thursday’s low early in Friday’s session, but they also cleared broadening wedge support at 110.40/50.
They also appear to have broken below the 110.00/10 area.
This leads me to believe the USDJPY will continue to weaken this week.
Although the 110.00/10 area may attract sellers early in the week, there’s a chance we could see a move back to former wedge support closer to 110.40/50.
Keep that in mind in case you decide to pursue a USDJPY short position.
Now let’s discuss a few key support levels…
As I wrote Thursday, the next critical horizontal level below 110.00/10 comes in at 108.70.
But the objective here, in my opinion, is the pattern’s inception point at 107.60.
Only a daily close back above former wedge support (new resistance) at 110.40/50 would negate my bearish outlook.
As for news, this week’s event calendar is relatively quiet.
However, that doesn’t mean USDJPY will be uneventful.
Some of the biggest moves from a risk-sensitive pair like USDJPY come from unscheduled events or simply a widespread shift in risk appetite.
Back on March 15th, I pointed out an inverse head and shoulders on USDCAD.
The pair was catching a bid in the 1.3280 area at the time.
As you can see from the chart below, it took buyers a few more sessions and some fresh lows before finding their footing.
But buyers did carve an inside bar pin bar combination between the 18th and 19th of March.
That buy signal took the USDCAD higher by more than 100 pips late last week.
For the week ahead I would keep a close eye on 1.3370 support and 1.3460/70 resistance.
I still think USDCAD has at least another 170 pips of upside potential, so I’m only interested in buying here.
The first option would be to buy on a rotation lower into the 1.3370 area.
Alternatively, a daily close above 1.3460/70 would also signal that bulls remain in control.
The objective comes in at 1.3600. However, there’s a good chance USDCAD buyers will want to retest the 2018 high at 1.3660.
The GBPAUD is refusing to break down.
I wrote about this channel on March 4th. At the time, the pair was coming off range resistance at 1.8720.
Then last Thursday, GBPAUD retested ascending channel support once more.
This has become an incredibly well-established pattern.
However, there isn’t much to do here until the pair takes out support on a daily closing basis.
Remember that I use New-York-close charts so that each daily session closes at 5 pm EST. That gives me five equal 24-hour sessions each week.
The false break above 1.8720 on March 13th is an excellent example of why I’m not a fan of buying GBPAUD.
You can even see where buyers carved a pin bar on the 15th.
But this type of sideways price action is what I avoid.
We will continue to monitor GBPAUD. At this point, it’s going to take a daily close below channel support to expose the 1.7740 area.
I won’t consider buying the pair now given that this channel appears to be a late-stage pattern.
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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