Weekly Snapshot | 26 – 29 September

In this week’s snapshot, we’re going to take a brief look at three markets: EURUSD, USDCAD and CADJPY.

EURUSD

Has the EURUSD carved out a long-term top? Based on the information I have today, I think so. My reasoning follows.

Since April this year, we’ve seen a EURUSD dominated by the bulls; no matter how you choose to define your trends, your analysis would have said the same thing: Price has been going up.

The pattern that I have drawn above shows a very common approach to both trading and defining trends – we have the impulse move (up) followed by a period of sideways consolidation, followed by the impulse…and so on, in a repeating cycle.

This chart also shows the first real threat to the bulls. Price has failed to push higher after consolidation, and in fact, seems to have fallen back into previous consolidation box. At the very least, we’re seeing buying enthusiasm fading.

I believe we’ll see price down to 1.1730 – this area roughly marks the lower level of support we see (2) and is where buyers previously stepped in. At that point, we might see a bounce back to 1.1880 (zone 1), or an outright collapse below 1.1730 (i.e., price unable to mount a retrace).

Trade idea: Should price fail to bounce at 1.1730, I’m interested in a short below that level. If we see a bounce and retrace to 1.1880, I’d be interested in shorting up there, off a bearish rejection. This trader is looking for short opportunities.

USDCAD

The Loonie is pretty as a picture. So here’ s a picture for you.

Price has retraced steadily to possible resistance at 1.2430 (zone 1). I’d like to see a bearish candle test this level and fail, to short down to 1.2100.

How do you know if price is printing a major reversal here, or simply retracing and gearing up for another fall? You don’t, not for sure, ever. However, what happens at zone 1 will give us the biggest clue. If price tests that level and fails, we have a good indication of what might happen next, and a possible 350 pips in it.

Trade idea: As above.

Bonus trade idea: If we’re seeing major USD strength returning to the market, we might soon need to switch over and look for a buy trade here. This could happen in one of two likely ways.

Way 1: Price retests 1.2430 and does not fail. In other words, price manages to close above this important zone, bucking the trend. Time to look for longs.

Way 2: Price does indeed fail at zone 1, comes down and bounces hard at zone 2 (1.2100), for a glorious double-bottom reversal.

CADJPY

No prizes for guessing how I’d like to play this one:

Trade idea: I’d like to buy a big old bounce off 89.50 as the bulls that have driven price up so hard recently defend their long positions. First target would be in the double-top range (91.20) and then 93.00 comes into focus (about 400 pips away).

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