Welcome Forex Traders to a new article.
Today our focus is on the weekly charts of the major currency pairs as we usually do on the first day of the week.
With 1,5 weeks of trading remaining in July, we are now approaching the most summer-ly part of the summer so be careful when trading the next few weeks as the liquidity and movements could be dyeing down a bit…
Hope you had a great weekend. I was playing some chess yesterday after not having played it for a long while. I used to play a lot and quite regularly for a decent part of my life. Chess always inspired me and I love the strategies and tactics. Forex trading has many similarities which closely resemble this great game of chess. For example, in both fields the elements of psychology, strategies and tactics are crucial components. I will try to use certain wisdoms which I have learned from chess for my Forex trading and in my articles this week 🙂
Anyhow, with that said, let’s take a look at the EURUSD… And, as always check out Tim’s great article on EA writing!
The position of the EURUSD has not altered much. Contrary to the GBPUSD, the EU did NOT break the weekly high of the week before… Furthermore, the weekly candle turned into an inside candle of a mere 185 pips, which is quite a small candle for a week candle.
The same characteristics are still affecting this EURUSD:
1) Massive upside impulse from 1,5 weeks ago when the EURUSD flew up 450 pips is still dominating the vibe and current market structure.
2) A break of the top was very likely, but contrary to the GBPUSD, this has not yet happened and the time factor has made the current setup iffy: an upside break is taking very long, while the downside has not gotten any traction so far.
3) The EURUSD is stuck within 2 wedges and the currency has gone sideways between 1.26 and 1.35 for most of the last year.
The following levels are key support and resistance:
a) Support at 1.31 bottom of 4 hour trend line
b) Support at 1.30 weekly low
c) Resistance at 1.3205 bigger top created on FOMC
d) Resistance at 1.3275 786 Fibonacci retracement
e) Resistance at 1.3340 886 Fibonacci retracement
When looking at the 4 hour chart, we already see a break of the top of the wedge. The next major level is the top at 1.3205. Looking at the Oscillator, the correction seems to have finished and the upside could be all good to go. Also, considering the recent bullish price action, the price of the currency is getting closer and closer to the 1.3205 top but it will be important to see the actual break occur before trading it.
We will need to wait patiently for one of these levels to be broken. Before that moment happens, the EURUSD might be bouncing up and down this tight range.
Just like with chess, although we might have a plan in mind (break of the EU top), we must wait for the right moment to execute the idea or else we risk getting burned.
UPDATE 10 AM: EURUSD is pushing above top due to the news announcement. Please read here more information regarding the news event.
The Cable is in a different situation than the EURUSD. Why is that? Here are some key differences:
1) This week’s high has already broken last week’s high
2) We have had 2 bullish weekly candles in a row
If are trading the GBPUSD to the upside, be careful of the 618 Fibonacci retracement level at 1.54 and the 786 Fib at 1.5550. Those levels can be key resistance.
If you want more information how to tackle the currency market, check out this article on winning Forex Strategy.
The USDJPY is in a tight spot as well. Not only is the UJ stuck in a wedge (green lines) but it has multiple major support and resistance levels around the corner.
The currency would either need to break above the 100.80-101.50 resistance bands or the 98.20-98.850 support zone before finding a more trending environment.
A break to the upside would see the currency hit the 102.60 resistance level and then the bigger top at 103.70. A break to the downside could mean that the currency will move down to the 500 Fib retracement and -0.272 target confluence at 97.50, or to the 618 Fib retracement and -618 Fib target at around 96.20-96.70.
What are your thoughts on the EURUSD, GBPUSD, and USDJPY? Make sure to drop down a comment below and post a screenshot and we will provide feedback on your analysis for free.
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