European Versus Commodity Forex Crosses

Hello Traders!

Yesterday we had interesting falls in the Forex market.

One of the most interesting developments is the downside movement of the EUR and GBP currencies versus the AUD and NZD. These crosses have made thousands of pips upside and yesterday broke their support trend lines. We will analyze what is going on there as well.

Before we do that, please take a look at previous articles to read about:

  1. the majors from Monday 
  2. the best break outs on Tuesday 
  3. the choppiness of the market on Wednesday 

EUR + GBP VS AUD + NZD

These 4 currencies share of course many currency pairs within them. But I will focus on 2 of them for now: the EURAUD and the GBPNZD.

Almost all of these currency crosses have been trending very impressively, so its just a random pick. So nothing against the EURNZD nor GBPAUD, these currency pairs have moved a lot too, but will focus on the EA and GN. Another trending currency by the way has been the AUDNZD, to the downside though. The only one that has been stuck in a sideways range for quite a while has been the EURGBP.

06 27 EURAUD WEEK

MAJOR 2000 PIP CLIMB

Anyhow the EURAUD has travelled from 1,22 to 1,44 in one shot. An amazing feat. And you are able to see that the currency bounced off a 886 Fib to the -1,272 target (although on the weekly chart it could be a 618 Fib bounce to -618 target as well). Anyhow, one day the fun has to stop and the trend is going to bend.

The bending of the trend really has not been that noticeable as yet. In fact if you were to put trend lines on the chart, then we can see that the speed of the price movement to the upside has actually accelerated. With that said though, we do see divergence between the previous 2 tops.

MAJOR BREAK THROUGH?

More importantly, we saw a break of the steepest trend line (purple). Yesterday was THE moment for the EURAUD and all the others: do we get a trend continuation bounce OR do we see a bigger downside correction? I was ready to pounce on the upside, not on the downside. Although I can imagine that many Forex traders took the opportunity to short the trend line break (purple).

The reason why I wanted to write about this currency pair is to be cautious about both sides at the moment. Despite the very appealing down move, let us not forget that the EURAUD is now approaching the daily support level at 1,3820. This usually is not a price area that is broken in one go without any serious bounce.

06 27 EURAUD WEEK 2

HEAD AND SHOULDERS PATTERN?

If / when we get that bounce, there is a chance that the EURAUD might make a head and shoulders pattern. The currency is well situated for such a pattern with the last 2 tops just above each other. A move up and a pause at the same level as the left shoulder could be the first indication of such a scenario. The following down move could once again provide great trending modes, this time to the downside.

Let’s see if such a pattern were to occur. In any case be careful of shorting it now or when we get very close to that daily bottom, a bounce back up, despite the bearish mode on the 4 hour chart nd daily candles is definitely possible.

GBPNZD

Th other one is the GBPNZD. We discussed this currency pair 1 week ago. And just wanted to review it quickly.

It looks like we are indeed getting double top on the daily chart and on the weekly chart it looks like there are 3 highs right at the same level which are not able to break the resistance trend lines and resistance horizontal lines. Here too, just like the EURAUD, the question begs: is this the first sign of down trend emerging? It is too soon to tell, to be honest. It is tempting to see a big fall. But trends take time to change and might always give  last push. Here too by the way there is a daily support at 1,9270. Time will tell if we get the lower high on the daily chart. Once that happens, the uptrend is probably toast… for a while :)

06 27 GBPNZD WEEK

Thanks for reading and sharing this article!!! Good Trading!!!

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Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).
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