FX Technical Report – Week Ahead
Technical Report Ahead of Week Beginning on the 31st of September
Key Ideas Summary
- EUR/USD – Long Bias
- USD/CAD – Short Bias
- GBP/JPY – Long Bias
Please refer to analysis below for further explanation and chart visualisations.
As illustrated it the image above, EUR/USD has been trading in a slight upwards channel structure. with successive higher highs and higher lows (uptrend). Whilst many have said 1.2 is unlikely to be met, the recent nosedive in the dollar index, following from the new inflation targeting initiative revealed by Powell, has provided the weakness needed for this pair to potentially achieve that level.
Prices have successfully rejected from the lower trendline support and has gained bullish momentum, closing and rejecting above the 8-day EMA at 1.18860. As shown above, on the 15 minute time frame, prices have broken a bullish pendant structure to the upside, further insinuating a move towards the upper trendline resistance of the channel and thereafter the 1.20 level if there is enough momentum. So long as the dxy remains under pressure, this pair will likely continue to push higher and respect the upper channel structure, however be mindful that the dollar could have a short term correction next week following heavy selling pressure which saw the index almost down 1% on Friday.
USD/CAD has displayed a rather perfect textbook definition of a downtrend, with lower highs and lower lows (illustrated by the white circles). Looking at prices more closely, the 8-day and 20-day EMA’s are almost crossing, a firm cross here would provide attractive entry opportunities for downside targets, with the expectation of a new lower low being formed. The previous ‘white circles’ show that when these two EMA’s cross, it results in a leg lower. Traders are advised to manage their risk accordingly, because there is not a channel like structure, traders will have to use their instinct to deduce when a lower low has been formed, it could be right below the previous low or much lower.
As discussed in a recent previous post ( JPY ready to explode higher or false hope ?) , the sharp JPY bid witnessed on friday is likely to be somewhat muted with the new appointed successor (who has not been named yet) , not likely to change any macro policies, essentially nothing really changes (please check blog to grasp a clearer understanding of this). As a result GBP/JPY looks ripe for potential long opportunities.
Currently price is testing a resistance zone that has been broken above, a rejection here could see further upside – potentially meeting the previous high at 141.600 roughly. The 8 and 21-day EMA are also aligned closely with the resistance zone at around 140.546, this area should be watched closely for a break or bounce situation. For traders that perhaps seek a more conservative entry , the minor resistance at 140.860 should be eyed carefully, note that there isn’t much resistance beyond this point , meaning a break and close above this level could see prices rally fast towards the 141.600 level