Forex Video Briefing (8/27) – EUR/USD, GBP/USD, USD/JPY
EUR/USD probably has the most chance of bearish continuation looking at the 1H chart which is clearly bearish, with no signs of reversal. You can say the same for the 4H and daily charts, but we do see oversold condition in the daily chart. Back to the 1H chart, we see that price started the week consolidating, but broke below this consolidation. Price is pulling back to essentially test this consolidation, and maybe the 50-hour simple moving average as resistance. So far, the EUR/USD-bears remain in control. A break above 1.32 will suggest the market is in the mood for consolidating further. A break above 1.3215 means the market is indeed in consolidation. Otherwise, if price can hold below 1.32, the downside risk remains toward the 1.3105 low from September 2013.
The GBP/USD looks stronger than the EUR/USD and has a better chance of a correction. After a dip to about 1.6540 to start the week, cable started trading sideways in consolidation. As we begin the 8/27 session, it looks like it is forming a double bottom. A break above 1.66 should accomplish this. This price bottom is approximately 60 pips wide, so we can look for a 60 pip rally above 1.66. The 1.6660-1.6680 area would indeed be one to expect resistance from as you can see in the 4H chart. A break above 1.6680 might also clear a falling channel resistance, and signal an even more significant consolidation or bullish correction. Otherwise, if price stays below 1.6660, there is still downside risk first to the 1.6540 level, then toward the 1.6464 lows form March.
Let’s look at USD/JPY’s bearish correction attempt. After starting the week with a bullish gap, USD/JPY has closed it and continues to consolidate, retrace. It just broke below a triangle pattern, and below the 100-, and 50-hour SMAs. The 1H RSI fell below 40 to show loss of bullish momentum. Basically, we should look for a nice bearish correction. But first there is a rising trendline to break, then the 130.50 pivot could be the next support. USD/JPY is still bullish, so traders are likely to look at a bearish attempt to buy on the dip. We should probably limit the bearish outlook to 103.10-103.20. This is a previous resistance pivot, and a local support pivot, reinforced by a rising trendline. This would give a bullish trade very attractive reward to risk, because a break below 103 can shelve the bullish outlook. Otherwise, there is still upside first toward this week’s high of 104.27, then the 2014-high at 105.44.