GBPUSD corrected this week, as expected, but had big problems at 3000, which seems to be a huge resistance zone for now. It might be a decision zone for next week…if bulls can break and stay above, the next target will be 3140-3190, if they fail to break above, bears might take over and re-visit below 2800. Weekly candle is mini bullish, so lets see if it helps bulls to break above 3000. For this reason, I am “scared” to short EURUSD just yet…as if GU goes up, EU will go up, too, most probably. I am still waiting for 1930-1950 on EU to be re-visited, to look for possible weakness there. If it goes higher, the double top at 2000 might be a good short, if it doesn’t break and close above 2020. Anyway, week should start bullish and then we will see how high it is able to go, to look for possible shorts.
The pound corrected way beyond my expectations, even though my final bear target was 2800 few weeks ago, but didn’t expect it to come so sudden and in such a disbalance with euro. Last week, EURUSD was ranging up and down, ended pretty much where it started and yet, GBPUSD dropped 500 pips, which is rare and should to be “fixed” by the market in the coming weeks. The market simply overreacted to Boris Johnson’s new UK internal market bill which overrides parts of the Brexit deal already agreed upon. Next week, we will see its second reading being discussed in the House of Commons, so lets see if it goes through in its current form or if it will be changed along the way. There seem to be many Tory rebels as it is, so even the vote in the House of Commons is not 100% sure, let alone the next step, which is House of Lords, where conservatives don’t even have a majority. And on top of that, a brexit deal should be done with the EU before year end, anyway, so then this bill wouldn’t matter anyway. Like I said, the market simply overreacted to this “news”, without thinking it through. And when retailers keep selling pound next week, banks will gladly buy it cheap to take them out.
Below is the daily and H4 chart, we can see it broke an uptrend channel on thursday, but failed to make it much lower on friday, week ended with a strong bottoming below 2800, which indicates a bull move on monday, depending on its strength, we can determine further levels. First, bulls need to break above 2860(friday’s double top) and stay there. When that is done, 3030 will be next big level and after that 3150-70 and finally 3240-3320. We have FED on wednesday and BoE on thursday, so enough volume for big moves. Lets see if it goes up and if yes, how high…
EU made a quick fake spike above 1.20 early this week, which made many retailers bullish and buying every dip, which is no surprise, as they are mostly wrong, anyway. Reality is, EU is still stuck in the same range and with ECB coming on thursday, it might be stuck there until then. For less experienced traders its better to stay out of the market until wednesday-thursday, because the market may make a lot of fake moves both ways until then. Its more likely to break to the downside, below 1800 than above 2000, this week. But like I said, if you are not confident about either side, just stay out early in the week, to avoid being trapped in a bad trade for 3 days or even longer.
For me, dollar is bottoming and I am expecting a spike up, but thats just me, there are still a lot of retail dollar bears, who are only seing the short side. As for numbers, I am not going to predict any, simply because its an ECB week and it would be pointless, I will take whatever the market gives me until the conference or beyond. What I CAN predict for this week is a lot of whining and moaning from retailers on forums, opening trades too soon and then complaining about market manipulation. My analysis is below, take it with a grain of salt.
Nothing new on the EURUSD front, still in the same range, so I’ll focus more on the pound in this analysis. GU looks strongly bullish and many retailers are looking for longs into next week, from what I have read, so its good to look into the other direction. Monday is the last day of the month and tuesday the first day of september, so a correction might start early this week. Trading volume should go up in september, with banks coming back from “vacation”, so its the perfect time for good corrections(or reversals?).
Monday’s asian session will show if bulls want to continue upwards or not and if not, Frankfurt might be a second chance for bulls to do a spike up, between 8am and 9am central European time, before London opens. So if there is going to be a spike up before the correction starts, I would bet on Frankfurt, as they usually do this on mondays. IF NOT, that will mean the bulls are weak and bears will probably take over early and can target even 1.30 again in september. My bear target is 3150 only and from then on we will see what happens.
Chart is clear to me, the upper range should hold or in case of a spike up, it should be only short-term.
Like I mentioned last week, after 8 bullish weekly candles in EURUSD, first time since 2004, there needs to be a bearish one, and we got one! Next week will be interresting, because we have a bearish weekly setup, even though not as strong and a bullish H1 and H4 setup. So I would say first up and then down…the question is how high and for how long. But long term bears should probably wait until wednesday-thursday for better entries. Targets are still the same, 1600-1650 for EU and 2800 for GU, the question is only where to enter, for minimum drawdown. I expect the week to start bullish and then we will see…
Pound is offering good opportunities for range trading during the past 2 weeks, with the price stuck in a small range, which mostly means that it is preparing for a big move…either up or down. For shorts, we have a clear SL zone above 3600, if it starts dropping, the first big target zone is 2500 and a small one at 2800, which was my initial short target for august. From a technical perspective, its a clear short of GU between 3100-3200, but pound doesn’t always respect technicals, especially not before spiking above or below good entry zones. So it might be a good opportunity to watch and evaluate and look for shorts if it isn’t able to break above 3200. Eventually bulls will get tired, if we stay in the current range, and give up. Then, 2800 would be the first target for bears.
First, I would like to mention something very interresting. EU had 8 bullish weekly candles in a row. Anyone remember the last time this has happened? Most won’t…it was in 2004! Check the chart below.
EU is currently stuck in a range between 1700-1900, so it provides good opportunities to both, bulls and bears. I am inclined towards scalping the spikes between 1800-1900, with a target of 1700-1720. Until 1695 breaks properly, we might be stuck in this range for now. I wouldn’t buy for targets above 1900, because a spike above 1900 might be a bull trap. 2 more weeks left in august, so lets see if we are still stuck in this range by the end of it, or if bears manage to break below. Until then…its scalping time. I highlighted possible target zones on the charts below.
We had an all week buying of both Euro and Pound until finally on friday, dollar bulls showed some strength, after 2 weeks!! Now the question remains, if it was just a “last day of the month” correction, after closing orders from the whole month or a first reversal sign. We will find out very soon. To me, both EU and GU are due for a correction. Statistically august is the 2nd worst month of the year for the pound(may is the worst), 9 out of 10 times, it goes down. I expect it to correct towards 2800, at least. Since EURGBP looks very bearish now, EU should drop more than GU, when dollar goes up. So for EU I would look for 1500-1550 as the first big stop…and if 1500 breaks, 1300 is my final target for now. UCHF is EU reversed, so same applies to it, as seen on the charts below. August might be a slow month compared to july, with less volatility, so not expecting anything as crazy as we have seen in july. And in september, markets should slowly go back to normal, with banks and other big players coming back “from vacation”.
Even if I am right with the above, there should still be a retrace upwards on monday, EU should go towards 1820 and GU towards 3130, at least. Doesn’t have to…but if you are into shorts, better to wait through asian session and wait for better short entries during Frankfurt or London.
To be honest, I am still analyzing what went wrong last week, since my analysis was completely wrong. The technicals and fundamentals did not match, not even a little! So its time to consider both scenarios…that EU has turned bullish or that this is simply a trap, to get as many people bullish as possible. Looking at the COT reports, I am having a hard time believing that the banks will just accept the loss and move on.
But even if the trend has turned bullish, there is no point to buy the current top, obviously. We need a healthy retrace, profit taking, to take place. The area to look for longs is clearly visible on the chart below. But there is no point to make detailed analysis after a week we just had, we need another weekly candle to know more. So next weekend the situation will be more clear, I hope.
For USDCHF bulls, the situation looks a little better, because while EU broke out of the daily range upwards, uchf is still in the strong demand zone and fundamentally, a strong Franc is hurting the Swiss economy, so there is a good chance of SNB starting to intervene heavily and weaken the Franc a bit. Swiss economy is export driven, 2/3 of the GDP is from exports. On top of that, Franc has a negative interrest rate, so there is no logic in buying it for longterm gain, especially at these levels, against the SNB. The safe haven argument doesn’t hold this week either, as UJ didn’t drop as much as UCHF did. So lets see if next week there is a healthy correction upwards.
They don’t want to give up, but eventually they will have to…last week might have been their last effort to go close to 1.15. There will be either a reversal soon or just a correction, if bulls want to keep pushing this up. The correction might go as far as 1180-1220, if it breaks below, its a reversal then. Now lets look at the COT data, banks(dealers) are now more short than they were when EURUSD was at 1.25, just think about that for a second…:)
Of course, banks can withstand more drawdown than us retailers can…for them 100-200 pips doesn’t matter much, but we are at a zone which would be very dangerous to long, so short is the only way to look right now, even if just for a correction, as I mentioned above.
Asset managers(hedge funds, etc) are on the opposite side, heavily long…and its not good to follow them, because they are very often wrong. If you look at the chart below, when EU was at 1.25, they were heavily buying, while banks were heavily selling. Just think about it next time when you want a fund to manage your money. Anyone seen Wolf of Wall Street? 🙂
Now look at all this from the EURUSD perspective. Better to take it slow this week and set small and realistic targets. So from looking at the H1 chart, we have a clear triple top, so 1370-80 would be the first area to look for when being short.
If this area breaks is yet to see, but if this does, we can move towards target number 2, on the H4 chart. Target 2 is 1280-1305, which was a strong support zone before last week’s upmove. Beyond that we probably don’t need to look this coming week, but we never know…all I know is not to go long at any of these levels, other than for a scalp. Long and hold, no thanks.
There might be another good opportunity at EURGBP this week, to start building medium term positions for a 400 pip downmove, with a SL above 9200. But the SL is still 100 pips away, so better to watch and evaluate during the week first. EG can be unpredictable short term.
Hello everyone. I am known under the name OnlineAddict on forexfactory. I have been a member there since 2014 and trading for over 10 years now. I mostly focus on currencies, but follow also stocks, cryptos and commodities.
