EUR/USD daily chart

Bullish momentum for the eurodollar shows little signs of abating just yet – or does it?  Since late May we have seen the single currency break away from the springboard of 1.2850 and develop a bullish trend higher which has seen the pair take out the key resistance at the 1.3225 price region, as shown by the yellow dotted line.

The candle that triggered this move was associated with ultra high volume, clearly signalling that the major players were supporting this move higher. Since then the eurodollar has continued to climb steadily higher on towards the 1.3450 area, which was a price level, I suggested, as an initial target for the end of this week in one of my earlier market forecasts.

However, for volume/flow traders (of which I am one) the key point is this. We now have a market which is rising, but on declining flow, giving us an early signal that buyers are now withdrawing from this move. This early warning is highlighting a potential pause in the short term and a possible move into congestion, or even a pullback. However, this is certainly not a significant sign of a major reversal, and with the strong platform of support immediately below, any move lower is likely to be short lived, and bounce off this region before continuing higher.

To reinforce this view we only need to consider the volume at price histogram which has built a solid wall of resistance at the 1.3425 price area which has already been tested in today’s forex session. This may provide a temporary barrier to the move higher, but if this is breached, in the medium term, then this will add a further plank of support in the bullish trend higher.

Counterbalancing this technical picture is, of course, tomorrow’s FOMC statement in which the market is expecting clarification from Uncle Ben following his previous somewhat garbled utterings.  However, this may well have been deliberate, since the FED Chairman is renowned for his careful and precise pronouncements. Therefore, we can assume that this was simply a test of market reaction. Remember this is a classic central bank ploy ahead of any major change in policy.

To summarize, the eurodollar looks bullish, albeit on reduced flow and is also running into stiff resistance at the 1.3425-1.3450 price region and tomorrow’s FOMC meeting may be the catalyst the pair needs to break through.  However, any failure will simply see the pair return to test the strong platform of support at 1.3250.

By Anna Coulling

USD/CAD – daily chart

An interesting technical picture is currently developing on the daily chart of the USD/CAD, following the recent sharp move lower for the pair after the failure to breach the 1.0400 level in late May. Since then, the pair has moved back once again to test parity, but given the volume profile now building, it will be interesting to see whether this move has already come to a halt. So what is so interesting?

First, the sharp move lower last week, was associated with falling volumes, and for any market to move higher or lower, then volumes should be rising, not falling. As we can see on the chart, the three consecutive down candles, whilst associated with above average volume, saw this volume decline over the period. Second, the last of these candles was a narrow spread candle, but high volume, sending a strong signal of buying in this volume bar. After all, if this were selling volume then the price action should have been wide, and is in fact narrow, so clearly an anomaly in the volume price relationship. Third, the following day we saw a gravestone doji candle, and the possible first sign of bullish momentum, which was duly confirmed in yesterday’s price action, supported by strong volume.

As I said at the beginning – an interesting picture on the daily chart, and provided we see volumes continue to remain firm on any up candles, then we could see a move higher to re-test resistance now in place at the 1.0300 region once again, and from there, a more sustained effort to recover the 1.0400 area in due course.

By Anna Coulling