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“If it is once again one against forty-eight, then I am very sorry for the forty-eight.”

                           Margaret Thatcher

FX Trading – Tip-toeing a fine line of support

Friday was a good day for the euro. But it wasn’t enough to eke out a gain on the week. And that could be very telling.

Have a look …

What Friday’s EURUSD rally was able to do was pull the pair back above critical support (red line); it’s currently hovering there, little changed to start the week.

The fact that the late-week reversal wasn’t able to allow the pair to close higher on the week could indicate that the bears are still in control, that this pair heads even lower before notching any noteworthy gains.

But if traders view last week’s bar as bounce-back, reversal-type price action then maybe this could help propel prices higher in a corrective fashion. And that’s where we’ll be closely watching the weekly downtrend line (blue).

If the euro struggles to break above that line in the next week or so then consider another playable down-leg is coming. On the other hand, a swift move, without hesitation, that sends the euro up through its downtrend will likely glean some follow-through strength. That means prepare for a playable correction, with resistance at $1.3830 being a logical first target (green).

Taking the dollar over the yen in a “sneaky pick.”

Barring a couple monster days to the high side, USDJPY has been fairly quiet during the month of March, after a month of February that resolved to go basically nowhere.

Last Wednesday and Thursday led the pair to break above resistance (red line):

Next up, as we think the pair moves still higher from here, would be a move to the early-January spike high (circled). But as the weekly chart below shows, that high is a small obstacle in the grand scheme of things; though a convincing move up through that level would lend a lot of credence to the idea that USDJPY bottomed-out last November.

We’ve got our members prepped and ready for a strong USDJPY; keep an eye on this one to move higher, perhaps quietly, over the next couple weeks.