The financial markets calmed down last week after the spike of volatility which took place after Turkish panic on August 10. Most of the currency pairs continued moving in the same direction in the first half of the previous week but a retracement and consolidation period came on Wednesday. We will try to have an outlook for the trading week ahead in this technical forecast.
The currency pair is in retracement mode after prices bottomed out at 1.1300 level on Wednesday last week. The 4-hours chart below shows an obvious bullish reversal signal at that time with MACD and RSI divergences in play. That signal was perfect to take profits from recent short positions and even an aggressive reversal for some traders. In addition to the divergences, there is also a head and shoulders reversal pattern which is not worked out completely yet. So it is better to have a wait-and-see position and stay out of the market for some time as the latest retracement seems to be very limited in time and volume of bullish achievements. There is a strong resistance level at 1.1450 with MA54 and green median line coming there. Moreover, the MACD divergence will be played out at that level as the lines should cross zero marks and the RSI indicator would be heading to overbought territory. The best trading strategy for EUR/USD for the week ahead is to see the price action approaching that resistance and be ready to renew short positions in the medium-term perspective.
The overall technical outlook for GBP/USD is almost the same as for EUR/USD. The difference is that the British pound was weakening at a much more sustainable pace this summer and that might be a sign of further bearish trend with a bit more volatility. Both MACD and RSI are still working out the bullish divergence and the price is rather far below the resistance level which is placed at 1.2800 with MA54. But looking at the Bollinger Bands, we should notice the overbought trading conditions which are already in play and GBP/USD bears could come back to the market before the pair will even try to reach the resistances. So an aggressive scenario suggests fresh short positions right at the beginning of the trading week ahead. More conservative traders might wait and see the momentum before joining the party.
Despite the fact that USD/JPY is in a sideways consolidation range, it does not stop smart traders from making money on this pair. Furthermore, the overall neutral outlook is giving an attractive opportunity to use both directions of the market. The only thing we need in this case is to determine correct levels when it is better to take profits and reverse. The range is comparatively tight with the bottom at 110.18 and the top at 111.35 currently. But if we could take profits on both bearish and bullish spikes, the overall income would be more than enough from the weekly perspective. Bollinger Bands is the best technical indicator for such trading conditions and it is showing the best entry levels. The prices are closer to the lower line of it and it is very important to watch them on the middle BB line. The aggressive strategy suggests long positions right by the market price with 70-80 pips targets. The conservative approach would be waiting for the prices to test resistance range at 111.00/35 and sell it from there.
Kiwi was one of the fastest currencies among others to recover versus the greenback. The two-day bullish spike of NZD/USD helped the pair to break out several local resistances like MA34 (on the H4 chart below) and recent median line (green) which used to support prices in July. These facts together with RSI turning in bullish mode makes a potential test of the resistance around 0.6700 more probable than a bearish pullback and the downtrend renewal. The most aggressive traders might consider buying NZD/USD with a tight stop-loss order just below 0.6584 with the target range of 0.6600/6655 in development. A conservative strategy underlines the need for more technical confirmations, especially on the larger timeframes like D1.
As long as this is the cross-rate and it excludes the greenback’s main role, this currency pair is driven by the difference in speed of GBP/USD and NZD/USD pairs. The H4 chart below shows a descending bearish channel and the current price below the middle line of it. Two exponential moving averages with periods 55 (blue) and 21 (green) have crossed each other, which is a bearish signal. But as long as the recent bottom at 1.9200 is not clearly breached, we might see a bullish comeback to the previous support and current resistance at 1.9300. That would be an attractive level to open fresh short positions for GBP/NZD with targets of 100-200 pips approximately. An additional confirmation for that suggestion is the Bollinger Bands indicator supporting the current prices with a high probability for a correction. Another probable scenario is to reload oscillators and BB getting out from the oversold territory by a tight-range consolidation. In this case, it is better to watch the momentum and jump in shorts once the price action becomes more active.
There is an interesting technical pattern for CAD/JPY currency pair on the daily chart below. The main part of the Ichimoku Cloud indicator turned bullish after the span crossed. The price is inside the span currently but recent bearish attempts to break out the support range of 83.62/94 Japanese yens per Canadian dollar were failed. This created a potential bullish spring bounce as the reaction on that. But as long as the local resistance of the Ichimoku conversion line at 84.74 holds the prices, this bullish pattern has to have an additional confirmation. For example, the daily close above the top of the span at 83.64 might be one of such confirmations. Anyway, the long-term targets are rather high: 87.11 as 2018 highest price. But the recent bears’ weakness gives all the cards in bulls’ hands to lift the CAD/JPY prices.