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EURUSD bulls cracked another significant resistance level last week at 1.1875. It’s the starting point of last month’s move lower that took the single currency below 1.1670.
Last week’s break comes just days after buyers closed the pair above the trend line from the current 2017 high. As you can see from the chart below, bulls flocked to the November 21 retest of former trend line resistance as new support.
Any retest of 1.1875 as new support over the coming sessions will likely encounter an influx of buying pressure. However, prices are getting a bit overextended from the 10 and 20 EMAs, so patience is key here.
During the holiday season, I like to wait for confirming price action more often than not. This is due to the decrease in volume that often occurs in late November and throughout December.
By ‘confirming price action’, I’m referring to a signal such as a pin bar or engulfing candle. As always, the decision is yours and yours alone as to how you approach the EURUSD and every other idea I publish on this site.
Key resistance comes in at 1.2040. It’s the 2012 low and was responsible for attracting the offers that formed the September 8 bearish pin bar.
Only a daily close at 5 pm EST back below 1.1875 would negate the bullish outlook. It would also re-expose the 1.1670 handle.
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GBPUSD bulls pulled off a significant victory last week. The November 22 close above 1.3290 was the first since September 29 and could mark a turning point for the pound sterling.
In early November it seemed as though sellers would close the pair below channel support near 1.3100. However, buyers held their ground and have since pushed prices higher by more than 250 pips.
That said, GBPUSD bulls have their work cut out for them this week. Trend line resistance from the 2014 high is once again in focus. That level comes in near the 1.3370/80 area.
We’re still watching and waiting for the GBPUSD to make its move. As I mentioned a few weeks ago, the terminal pattern that has formed as a result of trend line resistance and channel support will be the deciding factor going forward.
Those two levels intersect at some point in December. So, sometime between now and then, the pair has a big decision to make. Either break above the 2014 trend line or below ascending channel support from the March low.
Either way, the outcome could offer one of the best opportunities of 2017. In fact, a breakout from the terminal pattern will likely have repercussions that extend well into 2018.
In the short-term, however, the GBPUSD is range bound between 1.3290 support and 1.3370/80 resistance.
On November 15 we looked at how the USDJPY was trading below the key 113.15 handle. It’s a level we’ve had on our radar for weeks and one that would indicate a turn lower if broken.
At the time, prices had plunged below 113.15, but the pair hadn’t yet closed the day below the level. However, just a few hours after Wednesday’s commentary, sellers secured a 112.85 close.
That set up a short opportunity on a retest of the 113.15 area as new resistance. For the price action trader, it was one of those ‘bread and butter’ types of setups.
A support turned resistance (or vice versa) level like this is one of the purest forms of trading price action. But make no mistake. It’s also one of the most lucrative ways to make money and in a relatively short period of time.
The November 16 bearish rejection candle from 113.15 was our signal to go short. As mentioned in the last two commentaries, the target was horizontal support at 111.60. Sellers reached the level last week, which secured a 3.8R profit.
With the pair now trading below 111.60 on a daily and weekly closing basis, the recent losing streak looks poised to continue. As long as prices hold below 111.60 on a daily closing basis (5 pm EST), I will remain bearish. Key support comes in at 110.20.
On November 21, we discussed how the USDCAD terminal pattern was nearing completion. It’s a combination of trend line support from the current 2017 low and trend line resistance from the current 2017 high.
The November 22 close below trend line support brought this terminal structure to an end. It was preceded by a 4-hour close below support at 1.2757. I mentioned this break in the member’s area as it was happening.
As long as the resistance area at 1.2770 holds on a daily closing basis, downside levels remain exposed. Those targets include 1.2590 followed by 1.2420.
Both dollars have quite a bit of event risk to feed off of in the coming week. This is particularly true when Janet Yellen testifies starting at 10 am EST on Wednesday.
The Canadian dollar will likely experience the most volatility on Friday with the release of Canada employment numbers and the latest GDP figure.
Since breaking channel support on September 12, the EURGBP has gone nowhere fast. The pair has been limited to a 270 pip range between 0.8745 support and 0.9015 resistance since late September.
There was even a bearish pin bar that formed on November 15 after tagging the 0.9015 area for the third time. This range has offered traders the ability to go long from support and short retests of resistance.
However, the bigger play here would be a break from this range in my opinion. Due to the sizable distance between the range top and bottom, a breakout could carry the Euro cross 270 pips in either direction.
A daily close at 5 pm EST above resistance at 0.9015 would target the current 2017 high near 0.9280. Alternatively, a daily close below support at 0.8745 would pave the way for a move toward the 0.8470 area.
It just so happens that 0.8470 is a level I’ve had on my chart for quite some time. It may not look like much at first glance, but a view from the weekly time frame shows its influence all the way back to 2010.
Right now this is a waiting game to see whether it’s buyers or sellers that regain control. As always, the market will have the final say. You could trade the current range until the pair breaks out, but prepare yourself for choppy price action if you do.
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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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