The markets appear to have bounced back to life over the past 24 hours. However the world’s most popular currency pair has continued to struggle ahead of key resistance.
But more on that later. First let’s talk about two breakout opportunities on both GBPUSD and EURGBP.
I first mentioned GBPUSD’s attempt at a bullish breakout last Thursday, however the bulls were unable to maintain Friday’s highs and the market quickly fell back below the 1.4980 key level to end the week.
Fast forward to today and we have a new four-week high along with a daily close above 1.4980. This level previously acted as support between January and February and has subsequently resisted all attempts at a push higher since March 12th; until yesterday that is.
With yesterday’s close we can begin watching for a retest of the 1.4980 area as new support. Given the unrelenting bearish pressure over the past nine months I would like to see bullish price action on the 4 hour chart before considering an entry.
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As for resistance levels, we have the well-defined horizontal level at 1.5200 that is sure to attract sellers. However we also have trend line resistance that extends off of the pair’s six-year high from July of last year. This means that any long entry at 1.4980 should be closely monitored with trend line resistance just 120 pips above.
Summary: Watch for bullish price action on a 4 hour basis on a retest of 1.4980 as new support. The pair is likely to find selling pressure at trend line resistance from July of 2014. Break that and we could see a test of the 1.5200 key handle.
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As good as the GBPUSD setup may appear, it seems EURGBP has carved out a setup that may have even greater potential.
I first mentioned the double top pattern that formed between March and April nearly two weeks ago. At the time of that writing the pattern had not yet confirmed. That confirmation didn’t come until April 13th when the pair closed below the neckline at .7225.
Since that time EURGBP has been a slow-mover to say the least. The pair has bounced between .7162 and .7225 for the past six trading days, until yesterday’s session managed to produce a convincing close below the former key support level.
From here we can watch for bearish price action on a retest of .7162 as new resistance. Looking lower we have the .7100 support level along with the multi-year low at .7012. Both levels should attract buyers on the way down.
Note: I am short from the retest of .7225 on April 14th along with most other Daily Price Action members. However yesterday’s close could present yet another favorable opportunity for those looking to enter short or add to an existing short position.
Summary: Watch for bearish price action on a 4 hour basis on a retest of .7162 as new resistance. Key support comes in at .7100 and .7012.
Unlike the two pairs above, EURUSD can’t seem to get out of its own way. The pair continues to struggle at channel resistance that extends off of the April 6th high.
As mentioned yesterday, the more likely scenario from here is a daily close below 1.0658. The broader trend is still bearish and I see no reason to think otherwise given recent price action.
A daily close below 1.0658 could trigger a move back to the multi-year low at 1.0470. A retest of this level would surely present a challenge for the bears as any break below it would mean a new twelve-year low for the pair.
Summary: On the sidelines for now. I believe the two potential setups above, more notably EURGBP, present better opportunities over the short-term.
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Thursday, 24 January 2019