Key Support/Resistance Levels for Popular Pairs
We teach that trades should be entered and exited at or very close to key support and resistance levels. There are certain key support and resistance levels that can be watched on the more popular currency pairs this week.
EUR/USD : Very Bullish
The Euro has exploded to the upside during the trading week, breaking above the 1.15 handle rather handily. At this point, I think that buyers will continue to jump into this market on any type of dip as we have clearly changed the overall attitude of the US dollar. As the Euro has been the main beneficiary, I believe that this market will continue to go towards the 1.20 level longer-term. In the short term, I would not only expect some type of pullback, but I would welcome it. With this, I like the idea of finding value at lower levels, especially the closer we get to the 1.15 handle.
AUD/USD : Bullish
The Australian dollar has rallied significantly during the week, reaching towards the 0.71 level. Ultimately, we broke above there, and then we have pulled back to show signs of exhaustion. However, we have broken out now and I think that short-term pullbacks will continue to be thought of as buying opportunities as the Federal Reserve continues to work against the value of the US dollar. The 0.70 level is what I consider to be the floor at this point, so I am a buyer and I have no interest whatsoever in shorting.
GBP/USD : Bullish
The British pound has broken higher during the week, clearing the 1.2750 level, and even closed above there. If we can break above the 1.2811 handle, we will have cleared that most recent high and I think that we are looking to go to the 1.30 level at that point, and perhaps even the 1.31 level. Ultimately, I think that pullbacks should be bought as well, with the 1.2650 level offering significant support. The British pound has been a major winner over the last couple of weeks and it looks like we are primed for more next week.
USD/JPY : Bearish
We had expected the level at 107.43 might act as resistance, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows how the price rejected this level near the start of last Monday’s Tokyo session, typically a great time to be trading currency pairs or crosses comprising the Japanese Yen, turning decisively bearish when a bearish triple inside candlestick formation broke down at the down arrow shown in the price chart below. This trade has been extremely profitable, achieving a maximum positive reward to risk ratio of almost 8 to 1 so far based upon the size of the entry candlestick structure.
EUR/JPY : Mixed
We had expected the level at 122.19 might act as support, as it had acted previously as both support and resistance. Note how these “flipping” levels can work well. The H1 chart below shows how the price rejected this level near the end of last Monday’s New York session, turning decisively bullish with a small pin candlestick breaking up right away at the up arrow shown in the price chart below. This trade has been very profitable, achieving a maximum positive reward to risk ratio of almost 16 to 1 so far based upon the size of the entry candlestick structure.