GBP/USD Stopped At A Strong Resistance Level Before The Snap Election

The zone around 1.2900 – 1.2990 logically turned out to be a pretty strong resistance for GBP/USD after it was a quite strong support zone too, in the period July-September 2016, which the pair broke out below only after testing it twice. Usually such zones have an effect on the way the price develops over time, and this is the case now too.

My expectation that the pair will continue rising to test the resistance trend line of the downward trend from 6th July 2014 to 2nd October 2016 remains valid.

The last bullish bar from last week is a pin bar, which formed above the bar before it, which in itself is a signal for strong bulls. Despite that, considering the strong resistance level, we could see a correction to the downside to 1.2880 – 1.2750, before the pair continues rising.

We should not forget that that in a month there will be snap general elections in the UK, which may help the Prime Minister Theresa May find more support from the parliament in the impending talks with the EU regarding Brexit. So I think that is possible for the pair to remain range-bound around the above-mentioned level in expectation of the election results.

The USD/JPY Rally Still Continues

USD/JPY broke out above the resistance trend line in a very convincing manner, with two bullish bars. The first is a clear pin bar, the second could also be interpreted as one (the body is quite large compared to the wick), but it also is very telling of the strength of the bulls for the moment, not to mention that it opened and closed the daily session above the daily time frame it broke out above.

I have deliberately marked the possible movement of the correction from the previous assessment, because that way I could compare how deep it reached to where I thought it would go. As you can see, the correction was much more shallow than my assessment, which is another sign of the bulls’ strength.

In my opinion, the first serious resistance will be in the zone around 115.00 – 115.50.

I think that to the downside the pair could test the trend line it broke out above, but if that happens it will be a good opportunity to look for entries to open new long positions.

USD/CAD Renewed Its Rally

Despite the breakout below the support trend line and my expectation that there will be a move to the downside, USD/CAD renewed its rally, and not only did it do that, but it also formed a new high at 1.37931.

At this stage there are two possible scenarios:

To the upside the target is at 1.3950 – 1.4000.

I still think there is a possibility for a move to the downside and the first target is around 1.3550.

We should not forget that that this pair is largely dependent on the price of oil and said price continues falling. I think that at this stage we need to be very cautious and in my opinion, it’s best to use intraday trading approach.

EUR/AUD Will Continue Rallying, Especially If Emmanuel Macron Wins

EUR/AUD did not reach the limit of its divergence and close the gap as I thought it would. Actually the correction was pretty shallow – only 200 pips, after which the pair continued moving north, climbing with another 400 pips, from 1.45013 to 1.49104.

On Sunday is the run-off election between Emmanuel Macron and Marine Le Pen in France, which will likely be won by the former as the EU hopes, and that will likely give the required fundamental push to the EUR so I think we will see this pair rally again. On the other hand, if Marine Le Pen wins despite the polls that predict that she won’t, we could see the EUR drop in an unprecedented manner.

What is the technical analysis picture?

On the monthly time frame there is a strong resistance, and on the daily one we can see a pennant that the pair has broken out above and there is about another 500 pips until it reaches its limit. If it breaks out above 1.4850 – 1.4900, I think we could expect a rally to 1.5300 or even higher than that.

On the monthly time frame we can also see an inverted hammer bar right below the support at 1.40. Such a formation is a signal for a long-term rally, which also supports my analysis.
So from a technical analysis point of view the move north appears more likely.

I Expect A USD/JPY Rally To 119.00

USD/JPY has been rallying smoothly with almost no serious correction and reached the resistance trend line of the channel. Within the channel it formed a corrective flag that reached the trend lines four times that I can call an A-B-C correction without a doubt. The last above-mentioned move to the upside from 108.128 (from  17^th April 2017) could be interpreted as an impulse to the upside.

That could mean that the correction is over at this stage and we could expect a breakout above the resistance trend line.

If that assessment is valid there could be a rally toward  119.00 at least, i.e. another 600 pips to the upside, where is the limit of the flag.

In the alternate scenario there will be a new move to the downside to the support trend line, but I think that is not very likely.

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USD/JPY Has Possibly Ended The Corrective Drop And Is Renewing The Rally

The way the bar on the monthly time frame closed tells me that that the expectations for a new drop should be forgotten at this stage. The bullish doji bar that has formed on the chart is a signal for a serious renewal of the move to the upside.

On the daily time frame the pair is obviously moving toward the resistance trend line of the channel and there is no doubt anymore that it will reach it.

If the pair breaks out above the trend line we could accept that the A-B-C correction to the downside is over and we could expect a serious rally, perhaps to 123.00 – 124.00.

In the alternate scenario the pair will reach the trend line and begin to fall again, but I think that is less likely to happen.