Pound Set to be the Dominant Currency this Monday
Bullish Confluence on 1.4050
The euro has been having a rough time on the charts these past few weeks. Its weakness is very apparent on the weekly time frame of EUR/AUD. As you can see, the currency pair has lost more than 1,800 pips since the start of the year in January after it hit multi-year highs at 1.5798.
Don’t fret though! There are a few signs which hint that the euro’s sell-off could soon be over. For one, price is about to test the 100 SMA for support around 1.3940. Secondly, there’s a rising trend line that becomes apparent when you connect the currency pair’s most recent lows which it established in July 2012 and March 2013. In fact, this trend line falls in nicely with the moving averages.
Further affirming that the area around 1.3940 is a strong level of interest are the Fibonacci retracement handles from the low at 1.2196 to the swing high at 1.5798. Connecting these two price extremes, we would actually see that the 50% Fibonacci retracement level coincides perfectly with the two moving averages as well as the trend line.
Lastly, we have Stochastic indicating that the currency pair is already oversold. Will there be enough bulls in the market to push EUR/AUD higher?
Broken Resistance on Falling Trend Line
Don’t blink now but it looks like we’re seeing a trend line break on GBP/JPY! The daily chart of the currency pair reveals that a strong bullish candle is testing resistance at the 173.00 major psychological handle. In fact, this candle looks like it’s about to close above the falling trend line which has been formed from the highs established in July 3 and July 31. It’s also worth noting that the 200 SMA has also already been broken after a series of reversal candles materialized just below it.
What do you think? Is GBP/JPY set for a bullish rally?
If you’re keen on buying the pair, aiming for its most recent high just above the 174.00 major psychological handle may be a good idea.
Just be wary though! Take note that Stochastic already indicates overbought conditions. In fact, it is making higher highs while price is making lower highs. Consequently, this has led to a bearish divergence.
It’s also worth pointing out that the currency pair may only be retracing some of its losses. The area where it is currently trading now, 172.70, coincides perfectly with the 61.8% Fibonacci retracement level from the high at 174.21 to the swing low at 170.42.
Will the Falling Channel on GBP/AUD Hold?
If you’re on the fence about trading GBP/JPY, maybe this setup on GBP/AUD will tickle your fancy instead. The hourly time frame reveals that the currency pair has been on a down trend since July 3. In fact, if you connect its most recent highs and lows from August 18, you will notice that the currency pair is trading within support and resistance of a falling channel.
If you plan on trading it, you should keep tabs on the 1.7800 major psychological handle. Sure, price is already testing resistance on the 200 SMA currently. However, 1.7800 looks to be a better area of interest. It is where the 100 SMA and falling trend line look to converge. Reversal candlesticks around the area could mean that bears may soon jump in on the market and push price back down to support around the bottom of the channel and set a new low below the 1.7700 handle.
On the other hand, a strong bullish close above the psychological handle could mean that buyers are still in charge. This will mean that resistance has been broken and we could see GBP/AUD take a shot at 1.7865 where it previously topped out in August 26.