The EURUSD was a marvel last week, in fact for the past nine sessions (nine days) it has wowed running nearly 500 pips with Fridays close.
In last week’s forecast we were watching for either a buy or sell scenario to play in the 7th of June session and it surely came with a close above the channel resistance and Mondays candle taking out the high of Friday the 29th of May candle. The EURUSD encountered no resistance until Friday in the area of 1.13850/1.13400 confluence of resistance. 1.13850 is the top of a possible trend line. I say possible because the trend line has two touches with Fridays candle being the second touch.
The outlook for the week; it will be prudent to wait and see what happens on Monday. Is Friday’s pullback the result of profit taking or has the EURUSD put in a short term top? Monday will be the decisive session.
If the EURUSD open and starts an aggressive move towards 1.1230 and breaks below it that will indicate weakness and expose 1.1150 and channel/horizontal support around 1.1050/1.1070
On the other hand if the EURUSD breaks above the resistance zone between 1.1380/1.1340 that will expose 1.150 and 1.1725/1.1745 which is the top of the multiyear wedge on the daily time frame. Note also that the pair stopped just above the 50% Fibonacci retracement.
Fig1: EURUSD daily time frame
The cable cleared the resistance zone comprising of horizontal resistance, wedge support, and wedge resistance. The wedge bottom is also the bottom of descending channel. The pair is within the channel at 1.266 exposing 1.27693 followed by channel resistance at 1.300.
There is a critical support level at 1.254/1.245 as long as GBPUSD stays above this level that will keep the bulls in control. A break below it will expose lower levels 1.220 followed by 1.2000
Fig 2: GBPUSD daily time frame
NZDJPY was perfect, in fact more than perfect. I highlighted the sideways range which bound the pair in previous forecasts and last week’s forecast was about the breakout which happened on the 26th of may and I was of the opinion that if it stays above the range that will expose higher levels and sure enough the pair put in an impressive 470 pips rally.
Where to from here? Is a question that begs for an answer.
NZDJPY is facing a confluence of resistance 71.840 which is the bottom of a wedge/horizontal level; the broadening wedge broke down on the 26th of February. It is likely that this area will attract sellers, However if buyers manages a close above it that will expose higher levels.
That said, it comes down to what happens at 71.840, is it going to be some consolidation, a rotation or continuation rally? Only time will tell.
Fig 3: NZDJPY daily time frame
EURJPY broke out of two patterns which includes a large descending channel that has been in play since September of 2017. Second pattern was a broadening wedge that formed within the descending channel. It is important to note that EURJPY put in an incredible run of 668 pips in 10 days without any form of pullback what so ever. It broke through several levels to be at 123.720 above 123.400 resistance.
I will like to see some sort of pullback/consolidation because the pair had clearly over extended.
A close back below 123.450 will expose 122.630 followed buy 121.470 and 121.201. I personally do not wish to be a seller here but I will be relieved to see consolidation or a pullback before the market will makes another move.
Given the break out, I have interest in buying more than selling. A consolidation before the next leg higher is what I will love to see.
On the other hand, had we seen a V shaped ( aggressive pullback) below the channel top now resistance, that will signify a false beak and may send the pair to lower levels rapidly as is characteristics of false breaks so keep that in mind.
Fig 4: EURJPY weekly time frame
Fig 6: EUYJPY daily time frame
NZDUSD broke out of a multiyear trend line dating back to 2001 earlier in March, this forms the bottom of a large multiyear wedge. NZDUSD broke back into this wedge with Monday’s close although I was anticipating a sell off with a retest of the wedge bottom. Fridays candle stopped before the top of that wedge, 70 pips away. It is important to keep an eye on that level 0.6570, a confluence of resistance.
This point will be a deciding factor in determining the direction of the pair in weeks to come.
A sell signal will send the price back to the wedge support with resistance levels 0.64350 and 0.6320 being levels to watch on the way down. A break above the 0.6570 will expose 0.665, 0.6720 and 0.670.
Fig 7: NZDUSD daily time frame
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