A somewhat choppy dollar has provided markets with less clear direction, yet with a possible diamond top for GBP/USD and USD/JPY back at crucial resistance, we are likely to gain direction very soon.

Source: Bloomberg

GBP/USD diamond top in progress?
GBP/USD is forming a diamond top, which consists of a broadening formation, followed by a symmetrical triangle. This is a rare pattern which is typically seen as a sign of a possible impending reversal. Coming at a key resistance trend line (dating back to August), there is certainly the possibility that we could see it reverse lower.

However, we have not seen a break in either direction and thus I would need to see confirmation of a move before giving a directional bias. As such, a move through the top trend line, closing above $1.5508 would bring expectations of a break higher with resistance at $1.5529, $1.5552 and $1.564 in view.

Alternately, a close below the lower trend line and the $1.5431 support level would point towards the possibility that we have seen a top with $1.539 the first major support level in view.

EUR/USD breaks back below $1.146 to form double top
While we did expect some downside yesterday, EUR/USD certainly took it a step further, posting gradual moves lower. This has brought about the possibility of further downside and for this to happen, I would be looking for a close below this morning’s $1.1359 low and inside trend line.

There are no current signs of a bullish reversal and unless we see a move back above $1.142, it looks like further downside could be on the cards. Support levels to watch out for should we break back below $1.1359 would be expected around $1.1344 and $1.1328. Should we see a move back above $1.142, then this would bring a more bullish picture for the pair.

USD/JPY moves back to resistance following bearish break
Yesterday’s major break lower for USD/JPY has been followed up by a similarly sharp move higher, with price coming back up to the Y119.22 resistance level we were watch earlier in the week. A break back above this level could simply bring us back into the range we saw throughout the past two months and it will be very interesting to see if USD/JPY would turn lower from here or continue higher.

The long lower shadow on the last closed candle is a worry the bearish sentiment could not hold and would point towards a possible move higher. When coupled with the very shallow incline on this move, I would say it seems move likely to move higher than to selloff once more.

However, for now we continue to await a break in either direction, Y119.50 a key resistance level should we break through Y119.22, whereas a reversal would look towards Y118.60.

The selloff continues for USD/CAD
The past three days have seen selling resume for USD/CAD, in what has been one of the most consistent movers in recent weeks. We are moving higher once more this morning, yet I do expect this to be a short-term phenomenon and will remain bearish unless price moves back above C$1.2952.

Key resistance at C$1.29 lies just above the current price and this could hopefully mark the scene for the next move lower, yet I do see it likely that we will see selling resume once more in the coming hours for a move back to C$1.2835.

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