This week, we are taking a quick look at four markets, USDJPY, GBPUSD, EURGBP and GBPAUD.
I am leading with USDJPY today because UJ reflects risk-on, risk-off sentiment in the market quite well usually. We faced an uncertain weekend over air strikes in Syria, and yet UJ remained unconcerned – and given the overall price structure, I think that this pattern is set to continue.
In short, a “risk-off” move in markets shows up when money moves into “less risky assets”, like the Yen (making this chart go down). One would expect a military standoff between the USA and
Soviet Union Russia to cause a bit of panic in the market, and a move towards these less risky assets.
There are a few relevant items on this USDJPY chart that I find essential. Firstly, price is hugging horizontal resistance at 107.50 (blue box). Price has spent eight days up there, and the bears are having a hard time pushing price lower – all of which suggests a move higher is likely.
Secondly, price broke through and retested its longer-term downtrend months ago (red circles). Since then, we have seen higher highs and higher lows: another point for the bulls.
The only concern for the bulls might be that we are seeing price wedging into a terminal pattern (red, converging trendlines), suggesting another move lower. So who is going to win out? Given the current market structure, with the information we have at hand, the bulls have it. A break above 107.50 and a retest from above will cement the bullish case, and likely be a trade worth getting behind.
Conversely, if the Dollar fails here and breaks down below the lower red trendline, I would flip sides and favour a move to 105.50 to 105 even.
The Pound has been relentless. The structure I prefer is to consider price being squeeze: By the horizontal resistance at 1.4300, and the upward sloping trendline running from late 2017.
At the time of writing, we see price trading above 1.4300 – but this matters very little. A close above 1.4300 is what matters because it would not be surprising to see price fail here and fall back into the wedge structure we see. Wait for the close.
Until price closes below the red trendline I have drawn in; I still favour longs. As such, a close above 1.4300 and a retest of that level, from above, now acting as support, opens up 1.4600.
EURGBP broke out of the range it has been in since September 2017 on Thursday last week. Whether you consider the bottom of the range to be better defined by horizontal support (grey line) or the red trendline probably makes little difference. Look for a retest higher, and failure to short, with 0.8350 coming into focus.
GBPAUD is knocking on 1.8400 (driven by GBP strength we have already touched on). Open up this chart for yourself, and switch to the daily timeframe. You will count no less than 16 daily touches up against 1.8400 – price is just aching to go higher. I think we will see a pop, retest and bounce soon, opening the way up to 1.9000.