Having threatened to break its ascending trendline last Monday, EUR/USD fought back to put in in its highest close in over two months.
The higher close and new swing low may have repainted the ascending trendline and horizontal resistance zone but it does little to change EUR/USD’s core market structure. This is a market which is being squeezed into a critical area of resistance.
Given that market squeezes are typically filled with randomness it’s likely that the best trading opportunities will come from playing the peripheries of the pattern. Buying bullish rejections of the ascending trendline and selling signs of exhaustion within the resistance zone are all viable options this week.
Cable continues to languish at the bottom of the relative strength list as last Thursday’s BoE policy statement knocked the stuffing out the market.
The 1.2400 marker remains a key area of short-term support. How prices respond to this level will likely set the tone for the week.
We’ll be keeping an eye out for lower timeframe bullish reversal patterns within the support zone whilst keeping in mind that a break and close below 1.2400 could trigger a much sharper sell-off.
USD/JPY failed miserably to reignite its uptrend last week despite the BoJ defending its yield targeting regime.
The market is holding onto support at 112.50-112.00 by the skin of its teeth as any rallies are being beaten lower by dollar bears. Friday’s trading range was the narrowest in over four sessions so there’s plenty of scope for intra-day movement. Buying into any decisive break below 112.00 is likely to prove foolish.
The Aussie was the star of the show last week as the market marched higher from a series of inside days.
Friday’s price action formed yet another inside day but we don’t expect it to have the same ‘springboard’ effect as last weeks. There’s a number of reasons for this conclusion including the size of the candle’s range, the size of the candles body and the RBA’s rate decision overnight.
We do however remain bullish on the Aussie and expect any retracements in to 0.7600 to attract fresh buying appetite.
