Switching it up for this week’s crosses watchlist by going with a diverse of setups & currencies ahead of top tier events from Europe and the comdolls.
Based on this week’s forex calendar, it looks like the British pound has the most potential for a pick up in volatility with a slew of top tier economic events and Brexit developments ahead. And if these updates go well for the U.K., then this textbook break-and-retest on GBP/NZD should make the watchlist as a potential way to play any Sterling upside.
On the four hour chart above, we can see that strong resistance area around the major psychological level of 1.9500 was broken at the end of April, and after a run as high as the 2.0000 handle, the pair is back retesting that broken resistance area. This also lines up with the higher ‘lows’ pattern, and with the stochastic pointing to potentially oversold conditions, bulls may start to look at this as a potential buying opportunity. Of course, if the Brexit developments and U.K. data worse, then keep an eye out for a break of the rising ‘lows’ for a potential short position.
The euro also has some top tier events later this week to potentially get the shared currency moving, most notably the latest PMI updates and the European parliamentary elections.
A great pair to watch for this week’s catalysts is EUR/JPY, which is grinding lower in a channel on the one hour chart above and finding resistance around the 123.00 major psychological level. Sellers could take back control up to that area, which could be here sooner rather than later give how the stochastic is rising up into overbought conditions. The bears are likely to consider shorts up to the 123.50 area, so be on the look out for reversal patterns there. The bulls could easily take the reins though on positive PMI data, which makes that pattern of falling ‘highs’ the one to watch for a break-and-retest setup scenario, and bullish momentum after.
CAD/CHF has been back in the bears control after a double top and neckline break lead to a strong move last week lead to a move down to the 0.7450 area. Since then, the pair has bounce to nearly retest the broken neckline, which also happens to be a 38% – 50% Fib retracement of that swing move lower.
With the stochastic signaling potential overbought conditions short-term, the bears may take back control if that area around 0.7540 continues to hold. If so and we see a break of the 0.7450 swing low, the next support area may not come until the strong swing low around 0.7385, which makes for a desirable potential return-on-risk if using the daily ATR of around 40 – 50 pips as an invalidation tool.