Forex Update – weekend review – 2 – 3 April 2016
EURUSD has been rising since forming a bullish Gartley pattern formation highlighted in the blue shaded region. Strong support came in at 5 January 2016, which has resulted in this rally of about 700 pips in the last 3 months or so.
Now, in short term, on a daily chart, the world’s most traded currency pair by volume is approaching a key pattern formation. It is the bearish Gartley pattern formation highlighted by the larger blue shaded region.
The region between 1.1475 – 1.1530 could act as strong resistance resulting in a pullback. If the pattern formation takes into effect, it could take EURUSD down to the 1.1100 – 1.1060 level.
EURUSD Daily chart:
Lets take a look at the longer term weekly chart of EURUSD. If the above mentioned pattern does take effect and pull back occours to the support areas identified and the support is held, we could be looking at a larger pattern formation taking effect. This could results in the EURUSD reaching for the 38.2% Fibonacci retracement of the entire decline from the 2014 highs back to the lows seen in 2015. This key level comes at the 1.1800.
GBPUSD has been quite volatile recently. Fears due to the Briton leaving the Eurozone could be a reason for the volatility we have seen in this currency pair. Looking at the shorter term daily pattern formation, we can see two scenarios folding for this currency pair. We will have to let the price action dictate which one is likely to unfold and be more patient before taking a position.
AUDUSD has been rallying along with a broader trend with a USD selloff since the third week of January 2016. Taking a look at the longer term weekly chart, we can see that key resistance levels are popping up which could tap the rally and send the AUDUSD lower perhaps even to resume its longer term downtrend.
Looking a the weekly chart of the AUDUSD we can see that the currency pair is approaching key resistance levels between the 0.7830 – 0.7880 region. This is where the 89 weekly EMA sits, also a confluence of 78.6% and 38.2% Fibonacci retracements forming a zone of resistance.
Lets take a closer look at the daily chart of the Aussie dollar. The region between the 0.7730 – 0.7880 needs to be watched for any topping pattern if it were to occour. Getting above the 0.7880 opens the door to the higher price levels of 0.8400.
Perhaps the most important chart for us to observe next week is the EURGBP chart. Taking a look at the weekly chart, we can see that the cross is at key resistance level. The the price is at the 38.2% Fibonacci retracment level of the highs made back in 2009 to the lows which took place in the early part of the year. Also the EURGBP is approaching the last significant rally which took place as highlighted in the fuchia coloured line.
It will be interesting to see how this currency pair fares against strong resistance levels. Based on the price action in the early part of the next week, it could offer a 1:5 risk to reward trade opportunity. Please read the disclaimer page on this website.
USDCHF had been declining along with the dollar weakness in the recent months. Taking a look at the weekly chart of USDCHF, we can see that the currency pair closed right at the 61.8% Fibonacci retracement level. There is strong support at this level, however, the weekly close is pretty strong to the downside. Next week, for this 3 drives to a bottom pattern to hold, as highlighted in the blue shaded region, we should watch the currency pair trade on smaller time frames to find a low risk opportunity to trade.
However, if this 3 drives to a bottom pattern does not hold, then the next level to look for is the 0.9350 where have a larger AB = CD pattern formation taking place at the 78.6% Fibonacci retracement.
Last but not the least, lets take a look at the dollar index. Dollar has been selling off in the recent
months. Looking at the Dollar Index weekly chart, we can see it is approaching key support levels.
Last Friday, the Dollar Index closed at the 78.6% retracement. The zone we are watching is based off the 3 drives to a bottom pattern as highlighted in the blue triangle region and also the AB = CD pattern formation which could take the index a little bit lower to the 0.9330 area.
Wish you all, as always Good Luck and prosperous trading!