USDCAD and EURGBP Technical Set-ups, Both Looking Weaker Ahead
USDCAD could play out like it’s 2017
The drop off the 2016 high led to a choppy extended rising channel that eventually broke hard in 2017. That break was then followed by another choppy extended rise from the middle of 2017 to early this year. The channel is longer, but still holds that same bearish-looking overlap in price that smacks of a corrective move.
We are seeing USDCAD this week begin declining out of the upward channel, and on that it could soon start to deteriorate in rapid fashion as it did a couple of years ago. There is support not far away via the last low in the channel structure created in January at 13068, and then the trend-line from 2012.
But if things are about to get ugly for the Dollar and we are in fact having a replay of 2017, then those should prove only to be minor speedbumps. Trades in the near-term still have room on the downside to develop before hitting these speedbumps.
Selling rallies and consolidations are a prudent approach to take here over chasing extended down-moves. There is resistance of varying angles (see chart) from 13238 up to near 13300 to watch for signs of stalling upward momentum.
If big-picture forces are to push USDCAD lower, then there should be a few good short-term sets that form along the path of least resistance that could lead to a revisit one day of the 12000 level.
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USDCAD Weekly Chart (ready to breakdown, perhaps 2017-style?)
USDCAD Daily Chart (watching for bounce/consolidation)
EURGBP has longer-term resistance, short-term price patterns
EURGBP isn’t a pair I touch much, as it doesn’t seem to offer a lot of great looks from my perspective. However, now is looking like one of those times where it could indeed set up nicely, with a few technical developments taking shape.
For starters, there is a trend-line running down off the 2017 high which brought in the largest group of sellers since rising off the bottom early last month. If the rally today were to falter, we could see a bit of a weekly reversal situation.
Pulling into the 4-hr time-frame, an upward channel structure has kept EURGBP guided higher for the better part of a month, but with selling on Tuesday and Wednesday the bullish pattern was snapped. But to confirm a break of these types of sequences, a decline below the most recent low inside the channel is desired.
A break of that low may be coming soon if a right shoulder of a head-and-shoulders (H&S) pattern forms. A turn down from around current levels and subsequent break of 8871 on a closing 4-hr basis will trigger the H&S pattern (also create a lower-low) and should set into motion a move towards just under 8800, the bottom of the rising channel.
My colleague, Daniel Dubrovsky shares a similar view, check out this piece for his take on EURGBP.
EURGBP Daily Chart (backing off trend-line)
EURGBP 4-hr Chart (Channel broke, H&S pattern forming)
***Updates will be provided on these ideas and others in the trading/technical outlook webinars held at 9 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.