EURUSD bulls retested the 2012 low at 1.2040 last week after retreating from the area in late August. The result of the previous week’s rally was similar to that of August 29th with prices falling back below the 1.2040 handle before the session close.
This leaves the level intact as resistance for the new week. Key support is also unchanged at 1.1875. Depending on if and when sellers retest this area, it could become a confluence of support given the ascending channel from the April low.
Given Friday’s bearish pin bar from 1.2040, we may see the single currency lose some ground early this week. However, the candlestick is relatively small compared to Thursday’s range, which casts some doubt over Friday’s bearish signal.
A better signal that sellers have reclaimed control would be a daily close (5 pm EST) below channel support near 1.1875. Until that time, buyers remain in the driver’s seat, and the nearest support level will continue to limit losses.
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The GBPUSD took out a confluence of resistance last week at 1.2970. This area had capped the pair since the August 29th retest.
Apart from Monday’s session, buyers were in control every day last week. They even finished with a close above the 1.3125 handle, an area that has been a factor since June of last year.
That means any retest of the 1.3125 handle this week will likely encounter an influx of buying pressure. Key resistance for the week ahead comes in near the August high at 1.3250.
There is a major trend line that extends from the 2014 high that could also come into play over the next few weeks. At the moment that level is near 1.3350, but it all depends on if and when the GBPUSD bulls decide to extend last week’s rally.
USDJPY bulls lost their grip on a significant level on Friday. The 108.25 area has been range support since mid-April.
With Friday’s close of 107.82, sellers are likely to stand their ground should the pair retest the 108.25 handle this week. A rotation into the area does seem probable given the distance between last week’s close and the 10 and 20 EMAs.
To the downside, there is a massive area of support at 106.00. This is the intersection of a key horizontal level and the trend line that extends from the September 2012 low.
A view of the weekly chart shows how the pair retested this level on four separate occasions between June and November of last year.
Bearish price action from the 108.25 area could produce a favorable opportunity to get short for a move toward 106.00. Alternatively, a daily close back above 108.25 would negate the bearish outlook.
Despite taking prices well above 0.8065 on Friday, AUDUSD buyers failed to maintain the intraday gains into the close. The result is an 80-pip bearish pin bar.
Friday’s candlestick pattern suggests that a pullback is likely this week. It also exposes the August low at 0.7820, though do bear in mind that the 0.7900 area could also attract a few bids.
Another consideration is that Friday’s signal is against the short-term trend. So while sellers may drive prices lower this week, any selling up here is technically against the grain.
The only thing that would negate the bearish pin bar is a daily close above 0.8065. Until that occurs, buyers are at risk of giving back some of their recent gains.
The EURGBP continues to trade within the ascending channel that extends from the May low. On August 28th we discussed the potential for a reversal from channel resistance. So far, that late August reversal has driven the pair lower by nearly 200 pips.
For the week ahead, the pair is likely to encounter an influx of buying pressure in the 0.9025/60 support area. To the upside, Thursday’s and Friday’s high near the 0.9200 handle will likely attract offers if tested.
The absence of a proper buy or sell signal leaves me on the sideline for now. As long as channel support near 0.9060 holds on a daily closing basis, the uptrend is intact.
However, if buyers fail to uphold channel support, it could lead to a significant pullback that would expose 0.8890 and perhaps even 0.8745.
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