Euro Consolidates Gains, 1.60 Next?

Last week, we identified a hammer at the EURUSD trend line support and advocated a long position targeting 1.5740, above the highest close of the preceding bullish run. Our reasoning was validated, yielding over 300 pips in profit.


Candlestick forum.

[B]EUR/USD[/B]

[B]Is 1.6000 next?[/B]

Last week, we identified a hammer at the EURUSD trend line support and advocated a long position targeting 1.5740, above the highest close of the preceding bullish run. Our reasoning was validated, yielding over 300 pips in profit.

Having closed above 1.5740, the EURUSD price action has consolidated in a tight 130-pip range. The pair showed a Hanging Man bearish reversal pattern following the close above the previous top, suggesting the up move was exhausted for the time being. The subsequent downside has been limited however, with the pair looking to be consolidating above resistance-turned-support at 1.5730. Having failed to violate the up trend, the EURUSD retains a bullish bias. On balance, US economic data turned from bad to mixed last week, so price action may continue to lack a clear direction until Friday’s Nonfarm Payrolls release. Though we will continue to buy the pair, the lack of a strong signal means we will keep a close eye on price action and cut losses quickly as we look for a test of the psychologically significant 1.6000 figure.

[B]EUR/USD Trading Strategy[/B]

  1. Long EURUSD closely above support at 1.5730.
    
  2. Set stop above 1.5630, a prior support/resistance area.
    
  3. Set profit target near 1.6000, risking 100 pips to gain about 270.
    

[B]GBP/USD[/B]

[B]Another retracement, another entry opportunity[/B]

Last week, we bought GBPUSD following a Bullish Engulfing pattern above support at 1.9740 targeting trend line resistance below 2.0208. The pair reached a high of 2.0191, coming within 17 pips of the target level we were looking at. As we have noted here before, traders need to be flexible with setting their stop-loss and profit target levels. Support and resistance often lies within a 10-20 pip range rather than a single price point. In our case, we took profit the day following the Star candle establishing the weekly high for positive gains over 300 pips.

Following the run up to resistance, the pair retraced to find support above price congestion in the 1.9900 – 1.9750 area. We have also identified a supporting trend line intersecting with a multiple support/resistance level just below 1.9900. The current candle looks to be shoring a Hammer, though we can’t be certain that will remain the case until it closes. Still, with no compelling evidence to change our mind, our bias on GBPUSD remains bullish. We look for an entry above support near the 1.9900 mark, aiming just below the 3/16 wick high close to 2.0278.

[B]GBP/USD Strategy[/B]

  1. Long GBPUSD above 1.9900

  2. Set profit target just below 2.0278

  3. Set stop-loss just below the price congestion at 1.9850, risking 150 pips to gain 378.

[B]
USD/JPY[/B]

[B]Range trading dominates price action[/B]

Having stabilized following a break past long-term support at 101.69, we were expecting USDJPY to present an upside opportunity. While the pair did not break down to hit our stop-loss, it failed to rally as well. Instead, USDJPY spent last week oscillating in a range between 98.90 and 100.70. Having entered long above 99.90, we closed out our trade at break-even as price action stalled.

Looking ahead, USDJPY does not present a clear signal for a directional move. However, given the pair’s penchant for following risk sentiment, we will opt not to range trade here given the proximity of multiple significant economic data releases. Instead, we will look for a daily bar close beyond current range boundaries. We will then reassess our bias, and establish a position accordingly.

[B]USD/JPY Strategy[/B]

We remain flat as we wait for confirmation of a directional bias.

[B]USD/CAD[/B]

[B]Range remains intact, waiting for a catalyst[/B]

Last week, we noticed a range that has contained price action since mid-November. A false break occurred in January, but the pair reverted back into the range and has in recent days established an Evening Star bearish reversal formation at top-side resistance. A significant down move failed to materialize, with consolidation in a smaller sub-range between the larger top at 1.0252 and 1.0090.

With pricing generally unchanged on the week, our posture on USDCAD remains unchanged. We favor a short below top-side resistance towards the bottom of the range.

[B]USD/CAD Strategy[/B]

  1. Short USDCAD below 1.0250.

  2. Set stop loss near 1.0390, above the false break high.

  3. Set profit target above 0.9870 at the most recent wick low and above the range bottom.

[B]AUD/USD[/B]

[B]Holding on for more upside[/B]

Last week, we noted a Morning Star formation at trend line support, a strong reversal signal. Citing an attractive yield gap of 5.00%, we established our long term bias for AUDUSD as bullish. Though the pair saw an up move from our entry above 0.9030 to reach a high of 0.9252 (222 pips), it failed to rally as high as our target below 0.9360.

Currently, price action has surpassed a multiple support/resistance level at 0.9113 and has stabilized. We will move our stop loss up to break even around 0.9030, eliminating the downside and continuing to hold for last week’s target.

[B]AUD/USD Strategy[/B]

  1. Holding long above 0.9113.

  2. Set stop break even, equal to the entry price for last week’s long position near 0.9030.

  3. Set profit target just below 0.9360, the site of wick highs following the previous support break.

[B]NZD/USD[/B]

[B]Consolidation delays bearish reversal[/B]

Last week, we opted to remain on the sidelines in NZDUSD. We noted a Morning Star pattern above support at 0.7872, coinciding with the first test trend line support test at the beginning of this month. We cautioned that the monthly NZDUSD chart suggests a long-term resistance level in place since 2003 coinciding with the 0.8200 level.

This week, the pair offers little by way of new insights. While the anticipated bearish run has yet to validate itself, our suspicion that the Morning Star bullish reversal pattern would see little follow-though proved accurate. Price action has remained range-bound, oscillating between 0.7880 and 0.8100. Without a clear candlestick signal to guide our thinking, we will hold off on taking a trade on NZDUSD. That said, our bias remains cautiously bearish. We will look for a daily bar close beyond the lower range boundary. Should that materialize, we will enter short below 0.7880 targeting 0.7390.

[B]NZD/USD Strategy[/B]

We remain flat as we wait for confirmation of a directional bias.

[I]To reach Ilya with comments regarding this or other articles he has authored, please email him at <[email protected]>.[/I]