FX snapshot – GBP/USD, USD/JPY, USD/CAD, EUR/GBP

Sterling continues to outperform alongside the dollar as we close out the week.

Euro and pound coins in a small pile
Source: Bloomberg

GBP/USD continues to trend higher into next week

GBP/USD is well and truly back on point this week, with clear progress being made towards the upside. With the Greek ‘resolution’ also came a settling of financial markets, and it makes you appreciative of a clear trend. On this occasion, we are clearly seeing a strong move higher, and I expect to see further gains as we move through the European session. Much like the previous two legs higher, I expect the price to run past the previous swing high ($1.5675) before retracing once more.

The signal to move out of a long position is likely to be another bearish engulfing pattern, which we have seen mark the tops of both the recent legs higher. We have also seen both pullbacks come in around 50%, which gives us a reversal target once the price does turn around once more.

Overall I am bullish for a move towards the $1.5747 region, which is likely to be followed by a bearish engulfing pattern and 50% pullback. If previous price action is anything to go by, my bullish view becomes negated below $1.556.

Spot FX GBP/USD chart

USD/JPY upside slowing somewhat, yet support is in view

USD/JPY has been a great performer this week, following a frustrating downside fake-out which will have caught many off guard. However, we are in a much more bullish environment this week, and I do expect to see any selling being bought into over the near term.

We appear to be in a short-term retracement at the moment, which can give good buying opportunities. Fortunately, the support levels to watch out for are in close proximity so I think any downside will be short term in nature. Wednesday’s peak of ¥123.97, coupled with the Tuesday peak of ¥123.73, are likely to bring the bulls back to the table for a move up towards the next major resistance level of ¥124.38. My bullish view would be negated with a move below ¥123.65.

Spot FX USD/JPY chart

USD/CAD helped on its way by the Bank of Canada

USD/CAD managed to smash through the crucial C$1.2835 level on Wednesday following another rate cut by the BoC. This provides a bullish outlook for further gains. However, there are two notable resistance levels in view. The C$1.3 handle is a notable psychological level to watch out for, but more importantly the C$1.3064 resistance level represents the 2009 high, and any move above this level would bring a new, almost, 11-year high. For now, I am bullish and expect another leg higher soon. This is the case unless the price moves below C$1.2906.

Spot FX USD/CAD chart

EUR/GBP breaks to new seven-year low

Yesterday saw the EUR/GBP pair break to a new seven-year low, bringing with it a renewed bearish sentiment. The hourly chart portrays a market which is falling at a very steep rate, and given the selloff seen this morning it is likely we will see some strength in the coming hours. However, past experience shows that the 20-hour SMA has provided a good selling point for this pair, and as such I am waiting for a move higher to sell into.

The 20-hour SMA has been a good estimate but hasn’t been accurate enough, and thus I will be bearish upon seeing a bearish engulfing candlestick pattern which has been the key sell indication for many of the recent moves lower. 

Spot FX EUR/GBP chart

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